UniCredit Sells Ukraine Unit to Alfa's ABHH for Shares

  • UniCredit will receive 9.9 percent stake in ABH Holdings
  • Bank to book about 200 million-euro charge in fourth quarter

UniCredit SpA’s move to transfer its unprofitable Ukrainian business to ABH Holdings SA may help it strengthen its presence in a region where the Italian lender is already one of the biggest banks.

In exchange for JSCB Ukrsotsbank, Italy’s biggest bank will receive new shares representing 9.9 percent of ABHH, a Luxembourg-based company investing in financial services in Russia and neighboring countries. ABHH is owned by Alfa Group, one of Russia’s largest privately owned investment groups whose founders include billionaire Mikhail Fridman.

The agreement announced late Monday includes put-and-call options on the stake in ABHH and offers UniCredit the right to sell the shares in an initial public offering. UniCredit will book a fourth-quarter charge of about 200 million euros from the sale, which is expected to close in 2016 and will not change UniCredit’s capital ratios, the Milan-based bank said in a statement.

“We welcome the final disposal of Ukraine without additional capital impacts” on UniCredit, Andrea Filtri, an analyst at Mediobanca who has a outperform on the stock, wrote in a note Tuesday. “We believe UniCredit needs to win back the market’s confidence through delivery actions, ultimately re-rating the bank’s profitability.”

CEE Presence

Chief Executive Officer Federico Ghizzoni is looking to offload unprofitable assets like Ukrsotsbank, which has become more of a burden during Ukraine’s conflict with Russia. At the end of September, UniCredit was facing a charge of 652 million euros as a result of the weaker hryvnia. Selling Ukrsotsbank will also help UniCredit eliminate some of the 18,200 jobs it intends to cut by 2018.

Alfa Group bought the Ukrainian unit of Bank of Cyprus Pcl for 202.5 million euros in 2014. The company also has interests including oil and gas, utilities, retail trade and telecommunications.

UniCredit, among the biggest banks in central and eastern Europe, operates in 17 countries, including Russia where it owns a unit with 18.6 billion euros of total assets. Its exit from Ukrsotsbank, which bought in 2007 in a deal valuing the company at more than $2 billion, comes three years after it sold Kazakhstan’s ATF Bank, a $2.1 billion investment made just before the financial crisis that also resulted in losses.

UniCredit fell as much as 2.2 percent and was trading 1 percent lower at 4.63 euros as of 12:03 p.m. local time, giving the bank a market value of about 28 billion euros.

Before it's here, it's on the Bloomberg Terminal.