Credit Agricole picked Alpha Bank as preferred bidder for Emporiki Bank

Through a press release issued earlier today, Credit Agricole (CA) confirmed it picked Alpha Bank as the preferred bidder for the acquisition of 100% of Emporiki Bank. CA also announced it has entered into exclusive negotiations with Alpha Bank and the deal is expected to be completed by YE’12.

CA total capital injection to Emporiki will amount to €2.85bn, an increase of €0.55bn on the €2.3bn capital injected in July. Furthermore, CA would subscribe to €150m in convertible bonds to be issued by Alpha Bank, which would convert into Alpha Bank common shares at the discretion of CA, subject to certain terms and conditions, which have not yet been disclosed. Note also that the disposal price was set at €1, while CA current funding to Emporiki would be reduced to €0.7bn from €1.5-2bn before the deal.

What is more important is that the transaction results in a net recapitalisation of the combined entity of €3bn minimising the number of shares to be issued in the upcoming capital increases. According to unconfirmed press reports, the capital requirements of the new entity would amount to c€6n and in case capital raising would be covered by 60% though the issue of common shares and 40% through CoCos, the rights issue for Alpha Bank would be reduced from €3.6bn to €0.6bn, incorporating the €3bn contribution of Emporiki following CA capital injection. Even if actual figures for recapitalisation needs and/or allocation of common shares and CoCos end up different from current press reports indications, it is clear that the transaction is capital accretive for Alpha Bank. Note that Emporiki turned out to be one of the most attractive acquisition targets in the Greek market, mainly due to its capital boost by CA, with National Bank and Eurobank also having submitted binding offers.

The new entity would be the second largest banking group in the Greek market with pro-forma assets of €78bn, following National with assets of €112bn, while total assets of the other two major Greek banks, Piraeus (incl. ATEbank) and Eurobank, amount to €74bn each. According to Alpha announcement, the new group will control a market share of 25% in loans and 19% in deposits, while fully phased operating cost synergies are estimated at c€150m per annum. Note that the integration and consolidation costs have not yet been announced.

The new round of consolidation process in the Greek banking market, which was initiated with the acquisition of the sound part of ATEbank by Piraeus Bank at the end of July, is expected to be followed by the sale of Geniki Bank (99.1% owned by Societe Generale) with Piraeus Bank and SocGen confirming they have been engaged in confidential discussions since late August. A new deal could also stem from the potential disposal of Hellenic Postbank, which is 44.3% owned by the Greek State, while National Bank and Eurobank hold a stake of 6.1% each.

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