A big Czech banking market shake-up is on the cards after Prague-listed Moneta Money Bank (formerly GE Money Bank) on October 8 announced it is in discussions to acquire Air Bank and Home Credit’s Czech and Slovak consumer loans arm from the PPF Group owned by richest Czech Petr Kellner.
The Czech koruna (CZK) 20bn (€750mn) deal, which has reached a preliminary and non-binding stage, would create the third-largest bank by distribution network in the Czech Republic—behind Ceska sporitelna and CSOB—and the fifth largest by assets.
Moneta, which is to take the Air Bank name, plans to swap 24.5% of its equity in the form of new shares for Air Bank and Home Credit CZ/SK and make a cash payment to PPF of CZK6.75bn. Jiri Smejc’s Emma Capita is to take 2.8pp of the new shares.
Given that Kellner will own slightly more than a fifth of the new entity analysts spoke of how he might be pulling off a coup by swapping an unlisted financial institution for a listed one.
J&T Bank said in a research note: "It is too early to assess the benefit of the transaction for existing shareholders but we consider it positive that the bank will have a major shareholder and that it will be able to compete to a bigger extent with the largest banks on the Czech market."
‘Price 2.5 times higher than usual’
After the draft deal was announced, Moneta Money Bank’s shares fell at one point by 4.5%, before closing down 1.5% at CZK80.80. The share price fell as analysts and investors expressed doubt about whether Moneta is paying too much, with analyst Milan Lavicka at J&T saying that the price was 2.5 times higher than the usual price in Czech banking but that he does not consider it excessive given Air Bank’s quick growth and the expected synergies.
The fall in the share price was also attributed to Kellner’s reputation for taking a tough approach to shareholders in listed companies. When Kellner bought Czech telecom provider O2, remaining shareholders complained that Kellner was talking down the price while hiving off its best assets.
"The morning market reaction is a typical response when the buyers express concern about whether the acquisition is correct and, most importantly, correctly valued," said Radim Dohnal, an analyst from Capitalinked.com.
The unexpected transaction made a lot of sense, CEO of Chytry Honza Nicolas Eich observed. The new entity would become a leading player with a broad distribution network and a strong technological focus.
PPF Banka and the Zonka peer-to-peer lender are not part of the planned merger, Czech daily Lidove noviny indicated.
Completion of the Moneta/PPF transaction is planned for July 1, 2019. Upon settlement, Moneta will acquire 100% of the shares in Air Bank and Home Credit CZ/SK.
The new bank’s distribution network in the Czech Republic would boast 237 retail branches and 2,961 business partners supported by 1,005 ATMs.
More than a million clients of the Moneta Bank would join about 637,000 Air Bank customers and about 469,000 Home Credit retail borrowers.
For Moneta Bank, the goal of transaction is to increase earnings per share and dividend per share capacity by at least 10% in the first year after the transaction is closed. The newly formed group will target 75% of lending activities in retail and small business.
"Challenger banks have taken more than a million customers in the last 10 years out of the large banks," Moneta CEO Tomas Spurny said, as quoted by Reuters. "Instead of fighting a competitive pricing war we want to join our capabilities."
PPF Group invests in a number of sectors from banking and financial services to telecommunications, biotechnology, insurance services, real estate and agriculture.
It operates in Europe, Russia, Asia and North America. At the end of the year, the Group owned assets worth more than €38bn.
Home Credit, founded in 1997, is one of the leading providers of consumer finance in Central and Eastern Europe, the Commonwealth of Independent States and Asia. The majority owner is PPF Financial Holdings with 88.6%. The minority shareholder is the investment holding company Emma Omega owned by Smejc with 11.4%.
Moneta is a specialist retail and small and medium size enterprises-focused banking and financial services company. It offers various consumer credit and deposit products to retail and commercial customers, and is one of the largest companies traded on the Prague Stock Exchange.
A shareholder vote on the merger is expected by the end of this year. No current Moneta shareholder has more than 5% in the bank.