Raiffeisen Pays Discout on Polbank on Falling Valuation

Raiffeisen Bank International AG (RBI), eastern Europe’s third-biggest lender, completed the purchase of EFG Eurobank Ergasias SA (EUROB)’s Polish unit for a lower price than when the deal was announced a year ago.

Raiffeisen paid 460 million euros ($608 million) for a 70 percent stake in Eurobank’s Polbank, 30 million euros less than agreed in February 2011, the Vienna-based lender said in a statement today. The price is 1.5 times Polbank’s book value, less than the 1.7 agreed when the deal was announced. That could drop further, depending on Polbank’s equity as of the closing date today, Raiffeisen said.

The Polbank acquisition makes Raiffeisen one of the biggest lenders in eastern Europe’s largest economy, and the unit will become the bank’s biggest foreign division by assets after Russia. The deal is part of Chief Executive Officer Herbert Stepic’s strategy to bolster the bank’s presence in eastern part of the European Union, while lowering the dependency on business in the former Soviet Union.

“Combining Polbank and Raiffeisen Bank Polska will provide us with a strong basis for a broadly diversified business in one of the most solid and most strongly growing economies in central and eastern Europe,” Stepic said in the statement.

Funding Relief

Raiffeisen has formed a new company called Raiffeisen Polbank by combining Polbank with its existing unit Raiffeisen Bank Polska. Eurobank will sell its 13 percent stake in the combined company to Raiffeisen for at least 175 million euros, Athens-based Eurobank said in a separate statement, giving Raiffeisen full ownership of Raiffeisen Polbank.

Raiffeisen is gradually taking over the 2 billion euros of loans Eurobank provided to Polbank, which has funded its 5.23 billion-euro loan book only partly with deposits. Eurobank, which has suffered a “substantial reduction” in deposits at home as Greek savers withdrew funds, will be repaid 1 billion euros in funding immediately, a Raiffeisen spokeswoman, Ingrid Krenn-Ditz, said by e-mail. Raiffeisen will take over another 1 billion euros once it completes the acquisition of the remaining 13 percent stake from Eurobank.

Raiffeisen got authorization to buy Polbank from Polish regulator KNF this month in exchange for a pledge to sell at least 15 percent of the combined Polish division on the Warsaw Stock Exchange (GPW) by June 2016. It also plans a secondary listing for parent Raiffeisen in Warsaw by at least June 2018, Raiffeisen said in today’s statement.

The new bank’s managing board will be headed by Piotr Czarnecki, CEO of Raiffeisen Bank Polska, with Kazimierz Stanczak, president of Polbank, as first vice president, according to the statement.

To contact the reporters on this story: Natalie Weeks in Athens at nweeks2@bloomberg.net; Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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