HQ of the Romanian Commercial Bank (BCR)Bucharest, Dec 20 – “And BCR goes to… Erste Bank,” Romanian FinMin Sebastian Vladescu said, on Tuesday, following the computer-judged bid on 62 percent of the Romanian Commercial Bank. Austria’s Erste Bank and Portugal’s Millennium bcp were competing to take over Romania’s biggest bank.
"We got the improved bids tonight. At the end of a process that was not easy at all, BCR goes to… Erste Bank. The price offered per share is 7.65 euros," Finance Minister Sebastian Vladescu said.
"The price offered for BCR shows Romania is part of the European Union. It is a European price for a European bank. The Romanian assets have a European value, a global value," he added.
The shares will be paid for in no more than ninety days from the signing of the contract, during which period the Romanian party has to meet a series of requirements, such as the enactment by Parliament of the Government Ordinance on the privatization contract.
Back on Nov 1st, Romania Report said that Erste Bank was set to make the priciest ever Eastern European banking acquisition, having offered about €3.2 bln for a majority stake in Romania's
Banca Commerciala Romana (BCR), as ‘Financial Times Deutschland’ reported that day by citing Romanian government sources.
Yesterday, Erste Bank eventually won one of the last major bank privatisations in Eastern Europe with a €3.75 bln ($4.49 billion) bid.
Erste will have to raise its equity by more than a fifth to fund buying the 61.88 percent stake in Banca Comerciala Romana (BCR), its biggest purchase ever, bolstering Erste's position as the second-largest bank in the former communist bloc.
The sale, which had attracted several European banks, shows Romania's determination to push ahead with economic reforms ahead of European Union entry which the Balkan country wants to achieve in 2007, Finance Minister Sebastian Vladescu said.
"This privatisation will strengthen Romania's banking system and will help it become a competitive sector," Vladescu told a news conference after announcing the winner. Romania needs to boost public administration transparency and curb corruption to join the EU quickly, and its partners in the sale, the European Bank for Reconstruction and Development and the World Bank's investment arm IFC, have praised the tender as transparent.
Romania's government holds a 36.88 percent stake in BCR, which it is selling together with a 25 percent stake owned since 2003 by the EBRD and the IFC. Five Romanian investment firms own about 30 percent of BCR and the bank's employees hold 8 percent.
According to Reuters calculations, Romania will cash in 2.23 billion euros from the sale, the largest amount it has ever received from a privatisation. It has said the money may be used to upgrade its crumbling infrastructure and pension reform, but it has not said if it will channel the cash through the foreign exchange market.
Analysts had expected Erste to win the auction against its final contender, Portugal's largest private bank Millennium bcp, but had forecast a smaller 3.5 billion euro price tag. "This is more than I had expected," said Walid Khalfallah, banking analyst at Morgan Stanley.
"This stuff is very, very challenging." Erste said it will sell around 2.4 billion euros worth of new shares to fund the acquisition, more than 20 percent of its current market capitalisation. It will start working on a revamp of BCR immediately, aiming to double BCR's return on equity to 35 percent by 2009, something it has done well with past eastern European deals.
"Most people give (Chief Executive) Andreas (Treichl) the benefit of the doubt," said one analyst in London who refused to be named. "He's done a great job and has a good track record with his acquisitions. But you better hope nothing goes wrong with this one."
Erste will spend 100 million euros to improve BCR's branch network and infrastructure. It expects 90 million euros in extra costs next year, 100 million euros of additional risk provisions and a 100 million euro tax-related charge.
Erste's share price had slid by around 15 percent by mid-October from an all-time high of 47.75 euros on Sept. 12 as investors digested its plan to increase its share capital for BCR. They have largely pared those losses since. With the auction deadline looming, the bank's shares closed down 0.8 percent at 45.75 euros on Tuesday, valuing the bank at around 14 times next year's earnings -- close to the valuations of other banks with a presence in booming eastern Europe.
Romania Report
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