Investment group PPF and Moneta Money Bank (MMB) signed an agreement today to terminate the process of merging PPF’s Air Bank Group with MMB, partly due to the negative economic development which has radically changed the parameters of the planned merger, both firms said in an announcement.
Another reason lies in the recent changes in Czech National Bank’s (CNB) requirements for banks’ countercyclical capital buffer, according to the companies.
The deal was signed at PPF’s proposal.
“PPF believes the conditions underlying the agreed transaction are not and will not be fulfilled. PPF Group was ready to meet the transaction’s obligations, but it welcomes the termination agreement, deeming it the best solution for both PPF and other MMB shareholders,” PPF spokesman Leos Rousek said.
Moneta shareholders approved the planned merger with PPF’s banking arm, including Air Bank, the Czech and Slovak units of Home Credit and loan provider Benxy (providing peer-to-peer services Zonky), last December.
The purchase price of Air Bank was set at Kc25.9bn. Moneta planned to finance the purchase through a subscription of new shares and from its excess capital.
“The planned capital increase had been designed to raise approximately CZK 21bn through public offer of 255.5 million of new shares to existing shareholders, during two-round share subscription process. Therefore, the termination effectively discontinues the planned capital increase,” the bank said.
According to PPF, the current economic situation reduces the growth potential of the merged bank as well as its prospective dividend capacity. This would come as a result of the CNB’s recent decisions which increased countercyclical capital buffer from 0.5 percent to 2.5 percent in 2023 for all banks operating in Czechia, it said.
The completion of the transaction would also have severe implications for both the accounting and regulatory levels of equity, according to PPF.
In addition, the deteriorating macroeconomic and geopolitical situation, including the war in Ukraine, are significantly increasing economic risks and lowering the potential growth of the newly formed banking entity, PPF added.
“PPF’s statements make sense to me. Indeed, the countercyclical capital buffer rate is set to increase strongly, which in itself reduces the potential for dividend payments and thus makes an investment in Moneta shares less attractive. Of the banks on the Czech market, Moneta has the least ability to effectively pass on the CNB rate hike to its loan clients, and at the same time, its loan portfolio will be the most affected by the economic slowdown of the large banks,” analyst Radim Dohnal of the Capitalinked.com portal said.
The withdrawal from the planned merger is good news for the Czech economy because the stock market will not lose another solid title, he added.
According to X-Trade Brokers analyst Jiri Tylecek, the end of the acquisition is a great surprise and for PPF it means a loss that will certainly not increase its credibility.
“PPF has given a series of reasons why it is withdrawing from the deal, but even taken together they do not seem so fundamental as to throw the whole transaction under the table. Investors will not be too thrilled and we can expect increased volatility in Moneta shares. The banking sector is under pressure and PPF’s planned acquisition of Moneta could be the reason why the bank has been affected by the negative sentiment in the sector just marginally so far,” Tylecek said.
It is a question how Moneta shares will react to the situation, Tomas Pfeiler from Cyrrus said. “Investors will react positively to the fact that Moneta will not pay an exorbitant amount for Air Bank’s assets. However, it is also true that the PPF transaction represented a kind of safety net for Moneta shares. In the short term, the price may copy the shares of other banks traded on the Prague Stock Exchange and head down,” Pfeiler said.
Moneta said in its press release it had accepted PPF’s proposal on the understanding that it would recover the costs invested in the acquisition process while removing the uncertainties associated with the potential takeover of the bank.
“The termination agreement requires that PPF Group holds its current 29.94 percent stake in Moneta for at least 12 months and does refrain from seeking control through increasing the current ownership stake or decreasing ownership position in Moneta through capital markets. In this respect, PPF Group retains the right and ability to potentially sell the stake to a strategic investor,” Moneta said.
Moneta also confirmed it wanted to remain focused on the strategic target to post a cumulative five-year net profit of Kc23.7bn between 2022 and 2026.
Moneta will continue to pursue its independent strategy and objectives to deliver solid profitability to shareholders, including dividends in accordance with its dividend policy, Moneta CEO Tomas Spurny said.
Source: CTK
