Alior Bank S.A. — M&A Activity 2016

Apr 1, 2016

Share Purchase and Demerger Agreement regarding the acquisition of thedemerged business of Bank BPH S.A.

Pursuant to Article 56 Section 1 item 1 of the Act of 29 July 2005 onPublic Offering, Conditions Governing the Introduction of FinancialInstruments to Organized Trading, and Public Companies (the "PublicOffering Act") and Article 56 Section 1 item 2 of the Public OfferingAct in conjunction with § 5 Section 1 item 3 of the Ordinance of theMinister of Finance of 19 February 2009 on current and periodicinformation provided by issuers of securities and on conditions underwhich information required by legal regulations of a third country maybe recognized as equivalent (the "Ordinance"), the Management Board ofAlior Bank S.A. (the "Bank") hereby announces that:

(i) with reference to the Bank's offer to execute the transactioninvolving the purchase of the Bank BPH Core Business (as defined below)from the affiliates of GE Capital International Holdings Limited ("GECapital"), on 4 March 2016 the Bank received an invitation to commencenegotiations (the "Negotiations"); and

(ii) on 31 March 2016 the Negotiations were completed and the Bankexecuted with GE Investments Poland sp. z o.o. ("GEIP"), DRB HoldingsB.V. and Selective American Financial Enterprises, LLC (these threeentities jointly the "Bank BPH Sellers") a share purchase and demergeragreement regarding the acquisition of the Bank BPH Core Business (asdefined below) (the "Share Purchase and Demerger Agreement").

The disclosure of the information of the commencement of theNegotiations was postponed on 4 March 2016, pursuant the Article 57Section 1 of the Public Offering Act. Explanations concerning thereasons behind the postponed disclosure of the commencement of theNegotiations were provided to the Polish Financial Supervision Authority(the "PFSA") on 4 March 2016.

The Transaction

The transaction contemplated in the Share Purchase and DemergerAgreement involves:

(i) an acquisition by the Bank from Bank BPH Sellers of the sharesrepresenting a significant stake in Bank BPH S.A. ("Bank BPH"); and

(ii) a demerger of Bank BPH in accordance with Article 529 §1 item 4 ofthe Polish Commercial Companies Code to be effected through a transfer(spin-off) of the Bank BPH Core Business (as defined below) to the Bank(the "Demerger") and the issuance by the Bank of new shares toshareholders of Bank BPH indicated in the Demerger plan, other than theBank and the Bank BPH Sellers and their affiliates

(jointly referred to as the "Transaction").

Overview of the Transaction

As a result of the Transaction, on the date of the registration of theBank's share capital increase in connection with the Demerger by therelevant registry court (the "Demerger Effective Date"), the Bank willacquire Bank BPH's core business (the "Bank BPH Core Business") thatwill consist of an organised part of the enterprise (zorganizowana częśćprzedsiębiorstwa), including all the assets and liabilities of Bank BPH,excluding certain assets and liabilities that will remain in Bank BPHfollowing the Demerger (the "Bank BPH Mortgage Business"). The Bank BPHMortgage Business will include the mortgage loan portfolio of Bank BPH(in particular all PLN and non-PLN mortgage loans granted to individualsfor their housing needs), financial liabilities to entities of the GEgroup, and other assets and liabilities relating to the above-mentionedmortgage loan portfolio. Additionally the Bank BPH Mortgage Businesswill include the majority interest in BPH PBK Zarządzanie Funduszami sp.z o.o. ("BPH PBK") (the sole shareholder of BPH Towarzystwo FunduszyInwestycyjnych S.A. ("BPH TFI")), and liabilities of Bank BPH relatingto BPH PBK and/or BPH TFI. The Bank BPH Sellers undertook to the Bankthat the Bank BPH Core Business will have its regulatory total capitalratio, taking into account solely shareholders' equity ("Bank BPH CoreBusiness CET1"), as of the Demerger Effective Date at the level equal to13.25%.

The acquisition of the Bank BPH Core Business by the Bank as a result ofthe Demerger will be preceded by the acquisition by the Bank of arelevant number of shares in Bank BPH from, inter alia, the Bank BPHSellers in the Tender Offer (as defined and described below). As aresult of the Demerger, all of these shares shall cease to exist. As aresult of the Demerger the Bank will issue new shares to the minorityshareholders of Bank BPH, if such shareholders remain in Bank BPH at therelevant time, and the Bank BPH Sellers will remain the soleshareholders of Bank BPH (and therefore the economic owners of the BankBPH Mortgage Business).

Tender Offer

The acquisition of the shares in Bank BPH by the Bank will be conductedthrough a public tender offer for all outstanding shares in Bank BPH orfor 66% of the share capital of the Bank BPH (the "Tender Offer"). TheBank is obliged to announce the Tender Offer after the satisfaction ofthe conditions set forth in the Share Purchase and Demerger Agreement(see "Implementation of the Transaction" below). However, the Bank hasthe right to announce the Tender Offer before the satisfaction of theseconditions.

The exact number of the shares that will be sold to the Bank by the BankBPH Sellers will be determined by dividing the consideration due to theBank BPH Sellers for their interest in the Bank BPH Core Business by theTender Offer price.

Between the completion of the Tender Offer and the earlier of: (i) theDemerger Effective Date and (ii) a date falling six months after thecompletion of the Tender Offer (the "Interim Period"), the Bank agreednot exercise any rights attached to the shares held in Bank BPH, subjectto exceptions set forth in the Share Purchase and Demerger Agreement.During the Interim Period the Bank BPH Sellers will remain the referenceshareholders of Bank BPH.

Price

The purchase price for the 87.23% interest in the Bank BPH Core Businessheld by the Bank BPH Sellers amounts to PLN 1,225 million, subject toadjustments. The entire Bank BPH Core Business is valued at PLN 1,532million. It implies a P/TBV (price / tangible book value) multiple of0.93x. The final price due to the Bank BPH Sellers will be adjusteddepending on the adjusted tangible book value of the Bank BPH CoreBusiness as at the Demerger Effective Date (for reference, theunadjusted tangible book value of the entire Bank BPH Core Businessamounted to PLN 1,646 million as of 30 September 2015).

The Bank will offer the minority shareholders of Bank BPH a chance tosell their shares in Bank BPH for a price set out in the Tender Offer.If these shareholders still own shares in Bank BPH as at the DemergerEffective Date, these shares will be exchanged for shares in the Bank asa result of the Demerger.

Financing

The Transaction will be financed through the issuance of new shares bythe Bank to its existing shareholders in a public rights offering (the"Rights Offering"). The closing of the Transaction and preservation ofcapital ratios of the Bank at the levels adequate to the scale of theoperations of the combined Bank and the Bank BPH Core Business will besecured by the Rights Offering. The Bank is planning to hold a generalmeeting to approve the Rights Offering within the deadline set out inthe Share Purchase Agreement and to complete the Rights Offering in June2016, subject to market conditions.

The value of the Rights Offering will allow the Bank to both finance theplanned Transaction as well as ensure an appropriate capitalizationlevel providing a platform for future growth of the combined entity. TheCET1 ratio for the combined entity will exceed 10.75%.

The final number of shares to be issued in the Rights Offering and theissue price will be determined at a later stage of the Transaction. TheManagement Board of the Bank expects the issue price to be at a discountto the theoretical ex-rights price (TERP) not higher than typicallyobserved in such transactions.

Implementation of the Transaction

The closing of the Transaction depends on the satisfaction of certainconditions precedent specified in the Share Purchase and DemergerAgreement, which include the following:

(i) obtaining consent of a relevant antimonopoly authority;

(ii) obtaining approvals and clearances of the PFSA for Bank BPH, theBank and GEIP;

(iii) approval and execution of the Demerger plan by Bank BPH and theBank;

(iv) adoption of a resolution by the general meeting of the Bankapproving the Rights Offering (the "Capital Increase Resolution");

(v) registration of the share capital increase of the Bank based on theCapital Increase Resolution by the registry court;

(vi) adoption of a resolution by the general meeting of the Bankapproving the Demerger;

(vii) obtaining certain tax rulings (interpretacje podatkowe) in respectof the Demerger.

In accordance with the Share Purchase and Demerger Agreement, theconditions must be satisfied on or before the Long Stop Date which isset for 1 June 2016 for the condition in item (iv) above, 1 May 2016 forthe condition (iii) above, subject to possible extension, and 1 November2016 for the remaining conditions. If the conditions are not satisfiedby the relevant Long Stop Dates, unless the parties agree to extend suchdates, the Share Purchase and Demerger Agreement may be terminated byeither party.

The Bank will be disclosing the fact of satisfying or not satisfying theabove-mentioned conditions to the Transaction in current reports.

Break Fee

The Bank undertook to exercise its best endeavors to ensure thatconditions referred to in items ‎(iv), ‎(v), ‎(vi) in the section"Implementation of the Transaction" above are fulfilled before therelevant Long Stop Dates. If the Share Purchase and Demerger Agreementis terminated due to the those conditions not being satisfied by theagreed dates, the Bank shall pay to GEIP a break fee equal to EUR16,000,000 increased by VAT, if applicable. If the Bank fails toexercise its best endeavors to ensure that those conditions aresatisfied, the break fee shall not be the Bank BPH Sellers' exclusiveremedy and it shall be applied towards the amount of damages for whichthe Bank is liable.

Principle rules of allocation of the Bank's shares in the Demerger

In exchange for the Bank BPH Core Business being transferred to the Bankas a result of the Demerger:

(i) no new shares in the share capital of the Bank will be issued to theBank;

(ii) all the shares held by the Bank in Bank BPH shall cease to existand the Bank BPH Sellers shall become the only shareholders of Bank BPH;and

(iii) shareholders of Bank BPH other than the Bank and the Bank BPHSellers and the Bank BPH Sellers' affiliates that hold shares in BankBPH as at the relevant date set out in the Demerger plan, if any, willreceive shares in the share capital of the Bank in accordance with theshare exchange ratio for exchanging shares in Bank BPH for shares in theBank, established for the Demerger.

The share exchange ratio established for the Demerger

The Bank and the Bank BPH Sellers agreed that the share exchange ratiofor exchanging Bank BPH shares for the Bank's shares issued during theDemerger (the "Demerger Shares") (the "Share Exchange Ratio") shall bewithin the range of between 0.46 to 0.35 Demerger Shares for one BankBPH share. The Share Exchange Ratio will be established with referenceto the market prices and fundamental values of each of the banks.

The final Share Exchange Ratio is subject to the agreement of the Bankand Bank BPH in the Demerger plan.

Pre-Demerger Agreement

On 1 April 2016 the Bank also entered into the Pre-Demerger andCooperation Agreement with Bank BPH, with the support of the Bank BPHSellers (the "Pre-Demerger Agreement"). The Pre-Demerger Agreement setsout preliminary terms and principles of the Demerger, including thegeneral terms and conditions of cooperation between the parties in thepreparation of the Demerger plan and the implementation of the Demerger.The Pre-Demerger Agreement also sets out the principles for agreeing theShare Exchange Ratio and the principles of allocation of the assets andliabilities of Bank BPH to Bank BPH Core Business and Bank BPH MortgageBusiness. It also contains certain commitments of Bank BPH relating toconducting its activities between the signing of the Share Purchase andDemerger Agreement and the Demerger Effective Date.

According to the Pre-Demerger Agreement, the Demerger plan is to beagreed by the Bank and Bank BPH by 30 April 2016, subject to a possibleextension.

Support letter issued by PZU

On 31 March 2016 the Bank was informed by its significant shareholder,Powszechny Zakład Ubezpieczeń S.A. ("PZU"), that on 31 March 2016 inrelation to signing and implementation of the Share Purchase andDemerger Agreement, at the request of the Bank, PZU issued a supportletter (the "Support Letter") to the Bank BPH Sellers in which PZUundertook, subject to any regulatory requirements and/or requests of thePFSA, inter alia, to:

(i) vote all shares it holds directly in the Bank as of the date of theSupport Letter (i.e. 25.19% of the share capital of the Bank) or as ofthe date of the shareholders' meeting of the Bank convened in connectionwith the Transaction, whichever is higher, in favor of the followingresolutions proposed by the Bank at the said shareholders' meeting ofthe Bank to implement the Transaction: (i) the Capital IncreaseResolution and (ii) a resolution regarding the approval of the Demerger;

(ii) subscribe and pay for new shares in the Bank offered forsubscription in the Rights Offering pro rata to its current shareholdingin the Bank provided, however, that in no case will PZU be obliged tosubscribe and pay for shares which, together with the currentshareholding of PZU (and of any and all its related entities, theshareholding of which in the Bank is attributable to PZU pursuant to therespective regulations regarding significant block of shares in publiccompanies), would constitute more than 33% of all shares and/or votes inthe Bank; and

(iii) use its best endeavors to obtain, in a timely manner consistentwith the Share Purchase and Demerger Agreement, all regulatory consents(if any) required for PZU for the purpose of the Bank's completion ofthe Transaction.

In addition, during the period between the date of issuing the SupportLetter and the Long Stop Date, PZU undertook that, without a priorwritten consent of Bank BPH Sellers, PZU would not sell, transfer orotherwise dispose of any of its shares directly held in the Bank as atthe date of issuing the Support Letter.

Additional information regarding the Transaction

The obligations of the Bank BPH Sellers under the Share Purchase andDemerger Agreement are guaranteed by GE Capital Global Holdings, LLC.

On the day of the execution of the Share Purchase and Demerger Agreementthe Bank entered into a transitional services agreement with GE CapitalUS Holdings, Inc., concerning the continuation, for a transition periodindicated in the agreement, of certain GE group services provided inrespect of Bank BPH Core Business, including application services,access rights, IT and operational support service.

In addition, under the Share Purchase and Demerger Agreement thefollowing agreements will be executed by the Bank with the relevantcounterparties:

(A) on the date of execution of the Demerger plan:

(i) an outsourcing agreement concerning the servicing of the Bank BPHMortgage Business by the Bank;

(ii) an outsourcing agreement concerning the provision of IT services toBank BPH by the Bank; and

(iii) lease agreements concerning the use of the Bank's office space byBank BPH; and

(B) on the Demerger Effective Date:

(i) a transitional trademark license agreement concerning GE CapitalGroup' trademarks to be used by the Bank BPH Core Business untilcompletion of the rebranding; and

(ii) an intellectual property cross-license agreement concerning the useof certain GE Capital Group's intellectual property by the Bank BPH CoreBusiness.

The Bank shall inform the public of entering into those agreements inseparate current reports, if required in accordance with Polish law.

If following the completion of the Tender Offer, the Bank and the BankBPH Sellers hold jointly shares constituting at least 90% of the sharecapital in Bank BPH pursuant to the Share Purchase and DemergerAgreement, the Bank may, at its own discretion, proceed with asqueeze-out of the minority shareholders of Bank BPH and request theBank BPH Sellers to act in concert with the Bank with respect to thesqueeze-out.

The Share Purchase and Demerger Agreement is a "significant agreement"within the meaning of the Ordinance because its value exceeds 10% of theBank's equity.

The Share Purchase and Demerger Agreement may be terminated in certaincircumstances set out therein such as, for example, Bank BPH or the Banklosing their respective banking licenses.

If prior to the Demerger Effective Date a change in the legal and/oraccounting framework for FX mortgages or other banking industry-wideevent occurs that might reasonably be expected to materially adverselyaffect Bank BPH and as a result cause the Bank BPH Core Business CET1 toamount to less than 13.25% as at the expected Demerger Effective Date,the Bank BPH Sellers undertook to restore the Bank BPH Core BusinessCET1 via, inter alia, a recapitalization of Bank BPH up to the amountagreed upon in the Share Purchase and Demerger Agreement. If the amountrequired exceeds this value, the Bank BPH Sellers may elect to eitherproceed with the restoration of the Bank BPH Core Business CET1 or toopt out of it and terminate the Share Purchase and Demerger Agreement.If the Bank BPH Sellers fail to act, the Bank has the right to terminatethe agreement.

Strategic rationale for the Transaction

The execution of the agreement is consistent with the developmentstrategy presented many times and consistently pursued by the ManagementBoard of the Bank, based on a dynamic organic growth and acquisitions,coupled with the achievement of the highest levels of return on equity.As a result of the Transaction the combined bank will strengthen itsposition on the consolidating market. The number of customers will growto 3.3 million. The deposit base of the Bank will increase by more than1/3 (PLN 12 billion), while the portfolio of high-margin net loans willincrease by 1/4 (PLN 8.5 billion). Upon the combination the Bank'sassets will reach c. PLN 60 billion, which will place the Bank at the9th position in the banking sector. The experience of both banks'employees will form a solid basis for the development of innovativeproducts and service offerings and further increase in efficiency.

The Bank expects to benefit from pre-tax annual synergies of c. PLN 300million, before including PLN 160 million of synergies resulting fromthe implementation of Bank BPH's remedy plan. The full run-ratesynergies are envisaged to be achieved in 2019. One-off integrationcosts to deliver the planned synergies will be incurred until end of2018, of which the majority will be incurred in 2017.

Acquisition of the Bank BPH Core Business will be financed by the Bankthrough an issue of new ordinary shares with pre-emptive rights forexisting shareholders. PZU has committed to subscribe to its pro ratashare in the offering resulting from its shareholding in the Bank. Theenhanced capital position will allow the combined bank to maintaincapitalization levels exceeding 10.75% CET1 ratio and 13.75% CAR.

The Transaction is subject to fulfillment of conditions precedent,including consent of the relevant antimonopoly authority and approvalsand clearances of the PFSA. The Transaction is expected to close by theend of 2016.

Legal basis: Article 56 Section 1 item 1 - inside information; Article56 Section 1 item 2 - current and periodic information

Disclaimer:

Not for release, publication or distribution, directly or indirectly, inor into the United States of America, Australia, Canada, Japan or anyother jurisdiction where to do so would constitute a violation of therelevant laws or regulations of such jurisdiction.

This material is for informational purposes only and under nocircumstances shall constitute an offer or invitation to make an offer,or form the basis for a decision, to invest in the securities of AliorBank S.A. (the "Company" or "Alior Bank"). This material does notconstitute marketing or advertising material within the meaning of Art.53 of the Act on Public Offerings, the Conditions for IntroducingFinancial Instruments to an Organized Trading System, and PublicCompanies. A decision relating to the increase the share capital of theCompany has not been made yet. The shareholders' meeting of the Companythe agenda of which would include a resolution on the share capitalincrease has not yet been convened (the "SM"). The announcementregarding the convening of the SM will include a draft resolution of theSM regarding the share capital increase of the Company. In case of theadoption by the SM of the resolution on the share capital increase byway of the issuance of new shares in the Company (the "Shares") subjectto pre-emptive rights, the Company intends to file with the PolishFinancial Supervision Authority (the "PFSA") a motion for the approvalof a prospectus (the "Prospectus") which will be the sole legallybinding document containing information about the Company and the publicoffering of its Shares in Poland (the "Offering"). The Company will beauthorized to carry out the Offering only after the SM has adopted theabove-mentioned resolution and the Prospectus has been approved by thePFSA. The Company will make the Prospectus available pursuant toapplicable law.

The Company's securities have not been and will not be registered underthe U.S. Securities Act of 1933, as amended (the "Securities Act"), andmay not be offered or sold in the United States, unless registered underthe Securities Act or unless an exemption from the registrationrequirements set forth in the Securities Act applies to them. No publicoffering of the securities will be made in the United States and theCompany does not intend to make any such registration under theSecurities Act.

This material does not constitute a recommendation within the meaning ofthe Regulation of the Polish Minister of Finance Regarding InformationConstituting Recommendations Concerning Financial Instruments or IssuersThereof of 19 October 2005.

In the United Kingdom, this material is being distributed only to and isdirected only at "qualified investors" within the meaning of section 86of the Financial Services and Markets Act 2000 who are (a) persons whohave professional experience in matters relating to investments fallingwithin the definition of "investment professionals" in Article 19(5) ofthe Financial Services and Markets Act 2000 (Financial Promotion) Order2005 (the "Order"), (b) high net worth entities falling within Article49(2)(a) to (d) of the Order and (c) other persons to whom it may belawfully communicated (all such persons together being referred to as"relevant persons"). The securities will be available only to, and anyinvitation, offer or agreement to subscribe, purchase or otherwiseacquire such securities will be only with, relevant persons. Any personwho is not a relevant person should not act or rely on this material orany of its contents.

This material contains certain estimates relating to the Bank BPH corebusiness ("Core BPH"). The above estimates were prepared on the basis ofpreliminary financial data as of 30 September 2015 regarding the CoreBPH. These data were not the subject of Alior Bank's normal proceduresregarding the closing of accounting books at the end of each period andthe process of verifying the financial data (including the correctionsrequired for the purpose of presenting financial information) inaccordance with IFRS. These procedures have not been performed by AliorBank with respect to financial data regarding the Core BPH at all.

The estimates were prepared by Alior Bank as of the date of theirpreparation, based on the assumption that the source data regarding theCore BPH were correct and reliable and that no circumstances had orwould arise or occur which could materially affect these financial dataafter their provision to Alior Bank.

Neither of the above estimates nor source data regarding the Core BPHwere subject of an audit, a review or any other evaluation by anyexternal auditor in regard to the completeness and reliability of eitherthe adopted assumptions of the specified estimates or the accountingprinciples that were used to prepare them.

Statements contained herein may constitute "forward-looking statements".Forward-looking statements are generally identifiable by the use of thewords "may", "will", "should", "aim", "plan", "expect", "anticipate","estimate", "believe", "intend", "project", "goal" or "target" or thenegative of these words or other variations on these words or comparableterminology.

Forward-looking statements involve a number of known and unknown risks,uncertainties and other factors that could cause the Company's or itsindustry's actual results, levels of activity, performance orachievements to be materially different from any future results, levelsof activity, performance or achievements expressed or implied by suchforward-looking statements. The Company does not undertake publicly toupdate or revise any forward-looking statement that may be made herein,whether as a result of new information, future events or otherwise.

Neither the Company nor any of its subsidiaries, professional advisorsor any other related entities shall be held accountable for any damagesresulting from the use of this material or part thereof, or its contentsor in any other manner in connection with this material.