M&A Activity • Nov 5, 2018
M&A Activity
Open in ViewerOpens in native device viewer
ANNOUNCEMENT Reuters>bcp.Is Exchange>BCP Bloomberg>bcp pl ISIN PTBCP0AM0015
Banco Comercial Português, S.A. ("Millennium bcp") informs that its subsidiary Bank Millennium S.A. ("Bank Millennium"), in which it owns a 50.1% stake, announced today that it reached an agreement for the acquisition of a 99.79% stake in Euro Bank S.A. ("eurobank") from Societe Generale Financial Services Holding, a subsidiary of Société Générale S.A., for an estimated total consideration of 1,833 million zlotys*, implying a 1.20x P/BV (final purchase price subject to customary NAV adjustment at closing), to be paid in cash and fully financed from internal sources of Bank Millennium.
The acquisition of eurobank allows Bank Millennium to strengthen its position in the Polish banking sector. Furthermore, it will increase Bank Millennium's Client base, allowing it to reach the top 6 in Polish banking by number of retail Clients, as well as boosting Bank Millennium's geographic presence to smaller cities across Poland. It represents a profitable deployment of Bank Millennium's excess capital and liquidity, with EPS accretion expected to reach 26% from 2021. Bank Millennium's CET1 ratio is expected to stand at 15.9% after completion (17.2% including Bank Millennium's net earnings for the first 9 months of 2018), comfortably above regulatory requirements.
The transaction is expected to close in the second quarter of 2019, subject to regulatory approvals, and is estimated to be earnings accretive for Millennium bcp on a consolidated basis from 2020, already including integration costs, with an approximate impact of -40 basis points on its CET1 ratio and of -30 basis points on its total capital ratio expected on the date of transaction.
BANCO COMERCIAL PORTUGUÊS, S.A., a public company (sociedade aberta) having its registered office at Praça D. João I, 28, Oporto, registered at the Commercial Registry of Oporto, with the single commercial and tax identification number 501 525 882 and the share capital of EUR 5,600,738,053.72, LEI: JU1U6S0DG9YLT7N8ZV32
INVESTOR RELATIONS Rui Coimbra Phone +351 211 131 084 [email protected] [email protected] [email protected]
MEDIA CONTACT Erik T. Burns Phone +351 211 131 242 Mobile +351 917 265 020 [email protected] [email protected]
1/2
ANNOUNCEMENT Reuters>bcp.Is Exchange>BCP Bloomberg>bcp pl ISIN PTBCP0AM0015
"Millennium bcp informed the market in July 2018 that we would begin a cycle of growth built on strengthening our distinctive competencies, particularly our relationship-based, customer-centric banking model, and that we would continue to be a reference in terms of efficiency while benefitting from a diverse portfolio of international operations with significant potential," Millennium bcp CEO Miguel Maya said. "This acquisition occurs in a market with high growth potential, and has been carefully analysed given the importance Millennium bcp's Executive Committee places on rigorous management of capital and business risk. The bank is not planning any additional acquisition, with the growth expected in the strategic plan to be exclusively supported by organic development. We are confident that this acquisition will contribute to increasing profitability and asset quality for the Millennium bcp Group."
A copy of the relevant "current report" and presentation, as filed today by Bank Millennium with the Warsaw Stock Exchange, is attached.
*€428 million (€/zloty: 4.2807).
End of announcement Banco Comercial Português, S.A.
5 November 2018
Acting pursuant to Article 17 sec. 1 of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC ("MAR"), the Management Board of Bank Millennium S.A. ("Bank Millennium") hereby informs that negotiations to purchase shares representing approx. 99.787% of the share capital of Euro Bank S.A. ("Euro Bank") (the "Shares") from SG Financial Services Holdings (the "Seller"; Bank Millennium and the Seller are referred to jointly as the "Parties"), the Seller being a wholly-owned subsidiary of Société Générale S.A. ("SG") have ended and on 5 November 2018 Bank Millennium entered into a share purchase agreement with the Seller to purchase the Shares (the "SPA").
The transaction provided for in the SPA consists of the direct purchase by Bank Millennium of the Shares from the Seller (the "Transaction") for a price amounting to PLN 1,833,000,000 (one billion eight hundred and thirty-three million zlotys) (the "Price"), the Price being subject to adjustment mechanism following completion of the Transaction (i.e. transfer of the legal title to the Shares to Bank Millennium, the "Closing"). The final Price will be adjusted based on the comparison between the final net asset value of Euro Bank (calculated, in principle, as at the Closing date) and the reference net asset value used as a basis for setting up the Price and as a result such final Price actually paid by Bank Millennium for the Shares may differ from the Price stated above. Bank Millennium
will notify of the final amount of the Price in an appropriate current report. Bank Millennium does not intend to raise share capital to finance the Transaction.
The Closing of the Transaction is contingent on the fulfilment of certain conditions precedent set out in the SPA, which include: (i) obtaining consent of the appropriate antitrust authority; and (ii) obtaining clearance from the Polish Financial Supervision Authority (the "PFSA") confirming that there is no objection to the acquisition by Bank Millennium of the Shares (the "Conditions"). Furthermore, the Transaction requires filing of a notification to the European Central Bank by Banco Comercial Português, S.A. (being the majority shareholder of Bank Millennium).
The Conditions must be fulfilled (or waived in accordance with the SPA) before the long-stop date, which is set at the first anniversary of the execution of the SPA. If the Conditions are not fulfilled (or waived) before the long stop date, either Party will have the right to rescind the SPA, which will result in the cancellation of the Transaction on the terms set out in the SPA. Bank Millennium will publicly announce that the Conditions have been or have not been fulfilled in appropriate current reports.
Moreover, the Parties are entitled to rescind the SPA in certain situations specified therein.
Additionally, the SPA envisages that at the Closing the funding provided to Euro Bank by SG (including the subordinated debt provided by SG) will be repaid or refinanced by Euro Bank and/or by Bank Millennium in full (and in respect of the subordinated debt, provided by SG, subject to obtaining appropriate consents of the PFSA in this respect).
The SPA contains certain warranties given by the Seller concerning the Shares and the business activity of Euro Bank and specifies the terms of the Seller's liability in that regard.
The SPA contains also non-compete undertaking of the Seller with regard to taking up or conducting certain types of banking activity in Poland by the Seller and/or its group companies (save for, inter alia the activity conducted by the SG Branch in Poland) as well as non-solicitation undertaking of the Seller and/or its group companies regarding the key employees of Euro Bank.
Due to the fact that the Euro Bank holds a portfolio of loans denominated in CHF or denominated in PLN but indexed in CHF ("CHF Portfolio") that will be part of the assets of Euro Bank as at the Closing, the Parties agreed in the SPA that at the Closing Euro Bank and SG will enter into a CHF Portfolio Indemnity and Guarantee Agreement (the "CHF Agreement") providing for: (i) 10-year guarantees related to (a) an agreed portion of credit risk related to the loans performing as at Closing within the CHF Portfolio and (b) an agreed portion of the increase in cost of risk related to the loans non-performing as at Closing within the CHF Portfolio; and (ii) a 20-year indemnity related to certain other losses resulting from proceedings, litigations or changes in law related to the CHF Portfolio within the scope specified in the CHF Agreement. The CHF Agreement will provide for certain obligations of Euro Bank related to, inter alia, the administration of the CHF Portfolio and certain principles of liability of SG.
The SPA envisages also that at the Closing Euro Bank and SG will enter into an agreement related to the provision by SG of certain limited transitional services for Euro Bank following the Closing.
The SPA and the other documentation of the Transaction are governed by Polish law.
Following the Transaction Bank Millennium will retain the right to name and logo of Euro Bank. However, Bank Millennium's aim following the Closing is to focus on integration of Euro Bank into Bank Millennium group. Additionally, Bank Millennium intends to merge Euro Bank into Bank Millennium, subject to obtaining relevant regulatory approvals in this respect. Once the merger process is commenced Bank Millennium will publish an appropriate current report.
J.P. Morgan and Clifford Chance acted as Bank Millennium financial and legal advisers, respectively.
Legal basis: Art. 17 sec. 1 MAR – inside information
5 November 2018
This presentation (the "Presentation") has been prepared by Bank Millennium S.A. ("Bank") solely for information purposes and is addressed only to investors and analysts. This Presentation should not be treated as part of an invitation or offer to sell any securities, invest or deal in, or a solicitation of an offer to purchase, any securities or a recommendation to conclude any transaction or any promotional campaign, in particular with respect to the securities of the Bank.
Additionally, this Presentation contains financial data and various compilations thereof which were prepared exclusively for the purpose of the analyses of the potential transaction on the basis of subjective methodologies and specific assumptions and may, therefore, be incompatible with other compilations prepared on the basis of similar sources.
This Presentation contains forward-looking statements. All statements related to the future performance of the Bank and Euro Bank S.A. ("eurobank") including, without limitation, those regarding the financial position & performance, business development & strategy, plans and objectives concerning future operations of these entities are not and may not be read as financial projections or forecasts of these entities. Such statements depend on numerous assumptions regarding these entities' present and future business strategies and the environment in which they will operate in the future, and involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Bank and eurobank (as the case may be) to materially differ from future results, performance or achievements expressed or implied by such statements. Statements as to historical performance or financial accretion are not intended to mean that future performance, share price or future earnings (including earnings per share) for any period will necessarily match or exceed those of any prior year. Forward-looking statements speak only as at the date on which they are made and are based on the knowledge, information available and views taken on the date on which they are made; such knowledge, information and views may change at any time.
The information provided herein was included in current or periodic reports published by the Bank or is additional information that is not required to be reported by the Bank as a public company. The information contained in this Presentation is subject to, and must be read in conjunction with, all other publicly available information.
The proposed transaction described in this Presentation will be conducted in full compliance with relevant provisions of Polish law.
In no event may the content of this Presentation be construed as any type of explicit or implicit representation or warranty made by the Bank or its representatives. Further, neither the Bank nor any of its representatives shall be liable in any respect whatsoever (whether in negligence or otherwise) for any loss or damage that may arise from the use of this Presentation or of any information contained herein or otherwise arising in connection with this Presentation.
The Bank does not undertake to publish any updates, modifications or revisions of the information, data or statements contained herein should there be any change in the strategy or intentions of the Bank, or should facts or events occur that affect the Bank's strategy or intentions, unless such reporting obligations arise under the applicable laws and regulations.
This presentation is not intended for distribution to, or use by any person or entity in any jurisdiction or country, where such distribution or use would be contrary to local law or regulation or where such distribution would require any filing or registration to be made.
| Transaction description |
Bank Millennium S.A. ("the Bank") will acquire c.a. 99.79% stake in Euro Bank S.A. ("eurobank") from SG Financial Services Holding, subsidiary of Société Générale S.A. |
|---|---|
| Purchase price | Agreed reference price of 1 833 mln PLN adjusted by variation of net asset value of eurobank, implying ca. 1.2x P/BV |
| Transaction structure |
Acquisition price will be paid in cash and will be financed from internal sources of the Bank As a part of the transaction Bank Millennium will repay 4.4 bn PLN intra-group funding which Société Générale Group provides 1 to eurobank as at June 30, 2018 |
| CHF portfolio indemnity & guarantee |
Société Générale S.A. to provide upon the Closing of the Transaction: 10 year guarantee covering 80% of credit risk (regarding initially performing loans) and of cost of risk (regarding initially non performing loans) of FX mortgage loans, allowing for reduction of effective risk weight of acquired FX mortgage portfolio 20 year indemnity covering losses resulting from litigation, proceedings or changes in law related to the FX mortgage loans |
| Approval and timetable |
The transaction is expected to close in 2Q 2019 Completion of the transaction is subject to the relevant regulatory approvals from KNF and competition authorities and requires notification to the ECB |
| Synergies and integration costs |
Highly synergetic transaction with expected cumulative synergies over next 5 years in the amount of c.a. 650 mln PLN Integration costs of c.a. 350 mln PLN, incurred predominantly in 2019-2020 |
| EPS, ROI, ROE impact |
Transaction represents profitable deployment of the Bank's excess capital: 26% EPS accretion and 17% ROI once synergies are fully realised Expected 2020 ROE of the Bank should position it among top 3 Polish banks - in line with the announced strategic target |
| Capital and liquidity impact |
Comfortable pro forma CET1 ratio of 15.9% (17.2% incl. 9M'18 net profit of Bank Millennium) and loan to deposit ratio of 93% |
| Advisors | J.P. Morgan and Clifford Chance acted as Bank Millennium financial and legal advisers, respectively |
Overview
(all numbers as at 30 Jun-18)
eurobank was established in 2003 by Mariusz Łukasiewicz as a result of acquisitions and a subsequent merger of Bank Społem and Bank Wschodni
| PLN mln |
2015 | 2016 | 2017 | 1H 18 |
'15-1H 18 CAGR |
|
|---|---|---|---|---|---|---|
| Net loans | 10 540 | 11 398 | 11 731 | 11 905 | 5.0% | |
| Total assets | 12 290 | 13 709 | 13 798 | 13 919 | 5.1% | |
| Customer deposits | 5 770 | 6 850 | 6 817 | 6 952 | 7.7% | |
| Parent funding² | 4 690 | 4 692 | 4 437 | 4 431 | -2.2% | |
| Shareholders'equity | 1 356 | 1 475 | 1 565 | 1 520 | 4.7% | |
| Net interest income | 576 | 640 | 662 | 328 | 4.5% | |
| Net F&C income | 64 | 55 | 51 | 23 | -10.7% | |
| Net revenues | 707 | 794 | 746 | 383 | 2.7% | |
| OPEX | -466 | -462 | -456 | -232 | -0.1% | |
| Loan loss provisions | -73 | -127 | -122 | -68 | 23.0% | |
| Bank levy | 0 | -25 | -29 | -15 | n.m. | |
| Income tax | -33 | -38 | -36 | -25 | 15.2% | |
| Net income | 134 | 142 | 103 | 42 | -14.5% | |
| CET1 ratio | 12.4% | 13.1% | 13.6% | 15.1% | ||
| NPL ratio | 8.7% | 8.0% | 8.7% | 8.2% | ||
| Coverage ratio3 | 63.9% | 64.0% | 60.9% | 72.3% | ||
| Net interest margin4 | 4.82% | 4.93% | 4.81% | 4.74% | ||
| Cost / income | 66.7% | 63.7% | 61.9% | 60.7% | ||
| Cost of risk5 | 0.74% | 1.16% | 1.05% | 1.15% | ||
| RoE | 10.6% | 10.0% | 6.8% | 5.4% |
4
¹ Estimated number of clients not overlapping with Bank Millennium clients; ² Including funding from Societe Generale Paris, SOGECAP and SOGESSUR; 3 Including IBNR/stage 1-2 (for 1H18) provisions; 4 NIM calculated over average assets; 5 Cost of risk calculated over average net loans
| 1 | Increased scale on the market |
As a result of the acquisition, Bank Millennium will achieve clear #7 position in the Polish banking system |
|||
|---|---|---|---|---|---|
| Acquisition will add 1.4 mln new clients and allow Bank Millennium to reach Top-6 banks by number of retail clients in Poland |
|||||
| 2 | Strengthened position in consumer lending |
In line with Strategy 2020, the acquisition of eurobank will allow Bank Millennium to increase the size of its consumer lending segment as well as the overall importance of this business within the Group |
|||
| eurobank's new-to-bank lending capabilities will strengthen Bank Millennium's client acquisition engine |
|||||
| Complementary geographical presence |
eurobank offers Bank Millennium the ability to jump into franchise distribution model |
||||
| 3 | eurobank will boost Bank Millennium's presence in smaller cities |
||||
| 4 | Strong value to be created | Profitable deployment of Bank Millennium existing capital with +26% EPS growth once synergies are fully realised |
|||
| Transaction will also allow Bank Millennium to utilise its excess liquidity, resulting in pro forma loan to deposit ratio of 93%, in line with average for peers |
5
Transaction will allow Bank Millennium to consolidate its position in the Polish banking sector … 1-2
Source: financial statements and presentations of Polish banks
¹ Based on June 2018 financials except for Core Raiffeisen Bank Polska, Credit Agricole (31 December 2017), Core Deutsche Bank Polska (30 June 2017)
New clients acquired in 2017 (ths)
Loans sales to new-to-bank clients (2017)
1-2
Millennium network current coverage Additional coverage by eurobank
Network distribution by size of the city
Source: eurobank, financial statements and presentations of Polish banks,
1 Based on June 2018 financials (with few exceptions for 2017); including loans and deposits to financial sector (ex. banks); 2 Including cash and cash equivalents, due from banks and securities; ³ Agreed reference purchase price (subject to adjustment related to equity at closing)
Source: BCG All forward-looking statements subject to numerous assumptions and uncertainties. ¹ Including estimated 60 mln PLN write-offs related to IT and retail network; 2 Including fully phased synergies; 3 Including 24 mln PLN yearly dis-synergy related to bank levy 4
Operating expenses over average assets (2017)
EPS accretion (incl. integration costs) Return on Investment (incl. integration costs)
Note: All forward-looking statements subject to numerous assumptions and uncertainties. EPS and ROI data should not be construed as financial projections or forecasts. Bank Millennium's net income based on Bloomberg consensus as at October 18th, 2018 (for 2021, 2022 and 2023 assuming 8% annual growth rate, for illustrative purposes only). These data may not prove to be accurate and may differ from actual future results
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.