I have repeatedly referred, in the Polish neswpapers, to the fascinating topic of mergers and acquisitions (M&As) of banks in Poland. Again, I raised the issue at the Business & Law Blog at the end of 2011, where I pointed out that there were four banks in Poland listed for sale by their majority shareholders (Bank Millennium SA, Kredyt Bank SA, DnB Nord SA and Dexia Kommunalkredit Bank Poland SA). One of these banks was Kredyt Bank, whose value was then estimated to be around 3.6 billion PLN (more than $1 billion). On 28 February, 2012, Banco Santander SA (Santander) and KBC Bank NV (KBC), (owner of 80% of the shares and votes of Kredyt Bank SA) issued a joint press release concerning the agreement to merge Bank Zachodni WBK SA (Santander is the majority shareholder) with Kredyt Bank SA.
Transaction details
Santander and KBC signed the investment agreement concerning the merger of: Bank Zachodni WBK SA and Kredyt Bank SA. The transaction will occur through the increase of the share capital of Bank Zachodni WBK, and the newly issued shares of Bank Zachodni WBK will be offered and transferred to the KBC and the other shareholders of Kredyt Bank in exchange for their shares of Kredyt Bank (merger by acquisition according to the Polish Commercial Companies Code). The banks will be merged under the definitive agreements, and provided an independent valuation as well as formal authorization issued by the Polish Financial Supervisory Commission and approvals by competition authorities (European Commission or the Polish Office of Competition and Consumer Protection). Exchange ratio will be 6,96 shares of Bank Zachodni WBK for every 100 shares of Kredyt Bank. Assuming the current market price – the total value of the merged banks will be around 20,8 billion PLN.
Strategy According to the press release, through the merger of banks – Santander will increase its presence in Poland, one of the ten key markets in relation to the long-term aspect. The planned merger “will generate more business synergies than the synergies already announced by Santander after the acquisition of Bank Zachodni WBK (recall that in September 2010, Allied Irish Banks (AIB) decided to sell bank Zachodni WBK for a total price of EUR 3.1 billion in favor of Santander. For a package of 51.41 million shares (representing 70.36% of the share capital) of the Bank Zachodni WBK – Spanish bank paid 11.67 billion PLN, or approximately, EUR 2.9 billion). In turn, having in mind the current market valuations, the KCB shall record a one-time positive impact of approximately EUR 0.1 billion at the closing of the transaction and KBC, according to the press release, will continue to operate on the Polish market through KBC Securities (brokerage house) and KBC TFI (asset management). The effect of merger
As a result of the banks’ merger – the newly-created entity shall have a network of nearly 900 branches and 3.5 million retail customers, which presumably will place it on the third place among the banks in Poland in terms of deposits, loans, or the number of branches. The ownership structure of the newly established entity will be as follows: Santander will have approximately 76.5% of the shares of the combined banks, while KBC nearly 16.4%. In the hands of minority shareholders will remain about 7.1% of the shares. Subsequently, Santander and the KCB have committed themselves to cooperate in order to let KBC to leave the newly-established entity.
Strengthening the position of Santander
As the representative of Santander said – thanks to the transaction – Santander will substantially strengthen its presence in Poland, reaching critical mass in one of the key markets Santander is interested in. In fact, Santander will become the third force in the banking sector in Poland.