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December 17, 2009updated 04 Apr 2017 1:12pm

Top M&A deals of 2009: Dealing with a new reality

Set against a backdrop of watchfulness and, at best, cautious optimism, banking M&A in 2009 was characterised by lower asset values and government bailouts and while the number of deals remained surprisingly consistent, the total value of those deals dropped sharply In a year in which many banks concentrated on rebuilding their own fragile businesses rather than looking to acquire others, it is perhaps surprising that the number of financial services mergers and acquisitions in 2009 (4,641 as of the second week of December) is on course to match 2008s total (4,662), according to exclusive data from Thomson Reuters.

By Dan Jones

Set against a backdrop of watchfulness and, at best, cautious optimism, banking M&A in 2009 was characterised by lower asset values and government bailouts – and while the number of deals remained surprisingly consistent, the total value of those deals dropped sharply. Dan Jones reports.

 

In a year in which many banks concentrated on rebuilding their own fragile businesses rather than looking to acquire others, it is perhaps surprising that the number of financial services mergers and acquisitions in 2009 (4,641 as of the second week of December) is on course to match 2008’s total (4,662), according to exclusive data from Thomson Reuters.

The context of such purchases, however, remains very different to that of 2007 and indeed much of 2008, as a glance at the highest value deals this year demonstrates. The league table of the largest banking deals in 2009 puts things into perspective – eight of the top ten deals involved de facto government bailouts for fallen giants such as Royal Bank of Scotland (RBS) and Citigroup.

The exceptions are asset management firm BlackRock’s acquisition of Barclays Global Investors for $15.2 billion and Swiss private bank Julius Baer’s early-year capital raising, but the year has been characterised by sales that, if not distressed, certainly reflect a new era of lower asset prices and, consequently, bargain buys. This is reflected in the sharp fall in the total value of deals in 2009 – though the number of deals this year is consistent with activity in 2008, the total financial volume of $382.2 billion seen in 2009 represents a 44 percent drop from the $684.8 billion worth of deals transacted in 2008.

But if 2009 was characterised by governmental financial assistance, then 2010 may be defined by the next stage of that process: the forced divestments of business units – consumer finance arms, insurance divisions and others – now considered ‘non-core’ by either regulators or the banks themselves. Units already on the block include retail banking assets at RBS and Lloyds Banking Group (see RBI 622) as well as Citigroup businesses grouped in its Citi Holdings division such as most of Citi’s western European retail banking businesses (see RBI 619).

From a retail banking perspective, the largest deals of 2009 have already included notable divestments, such as RBS’s divestment of its businesses in Taiwan, Singapore, Indonesia, Hong Kong, the Philippines and Vietnam, which were sold to Australia’s ANZ for $550 million. And perhaps most notably of all, many of 2009’s largest acquisitions saw banks looking to gain market share in their domestic market, as opposed to the cross-border expansion that characterised the pre-crisis period.

By value, the top five retail banking deals of 2009 were:

• Société Générale’s €676 million ($989 million) purchase of the 20 percent of Crédit du Nord it did not already own from Belgium’s Dexia.

• Criteria CaixaCorp (the holding company controlled by Spain’s largest savings bank, la Caixa) acquiring a 4.9 percent stake (later increased to 5.1 percent) in Austria Erste Bank for €628 million ($918 million).

• Bradesco’s purchase of fellow Brazilian institution Banco ibi for BRL1.4 billion ($799 million).

• ANZ’s purchase of selected Asia-Pacific assets from RBS for $550 million.

• Barclays’ acquisition of the UK’s Standard Life Bank from insurer Standard Life for £226 million ($366.5 million).

Mergers and Acquisitions

2009 – largest banking deals by value, January-December

Acquirer/investor

Target

Value ($bn)

Country

Date

HM Treasury (1)

Royal Bank of Scotland

41.88

UK

26.02.09

Preferred Shareholders

Citigroup

28.08

US

30.07.09

BlackRock Inc

Barclays Global Investors Ltd

15.2

US

11.06.09

HM Treasury (2)

Royal Bank of Scotland

13.14

UK

26.02.09

Preferred Shareholders

Citigroup

10.5

US

23.07.09

Preferred Shareholders

Bank of America

9.5

US

25.06.09

CNCE

Banque Federale des Banques

8.9

France

26.06.09

Shareholders

Julius Baer-Private Banking

7.6

Switzerland

01.10.09

HM Treasury

Royal Bank of Scotland

7.52

UK

16.03.09

US Dept of the Treasury

GMAC

7.5

US

20.05.09

Notes: (1) pending; (2) intended. Source: Thomson Reuters

 

RBI DealWatch

RBI DealWatch tracks global financial services mergers and acquisitions, privatisations and demutualisations, flotations, divestments, share stakes, strategic alliances and joint ventures.

Europe, Middle East, Africa

Country

Participants

Type/value

Description

Date

UK

Lloyds Banking Group

Capital raising

Lloyds Banking Group (LBG) has completed its £13.5 billion ($22 billion) rights issue, with shareholders – including the UK treasury, which still holds a 43 percent stake in the group – taking up 95 percent of the shares on offer.

14 Dec

Slovenia

KBC, Nova Ljubljanska Banka, China Development Bank

Possible stake acquisition

China Development Bank is eyeing up a bid for KBC’s non-strategic 30.6 percent stake in Slovenia’s largest bank, Nova Ljubljanska Banka, according to Slovenian press reports.

11 Dec

The Netherlands

ING

Repayment of state aid

ING is to repay state aid of $5.6 billion prior to the year-end, with the proceeds of a €7.5 billion ($11.1 billion) rights issue expected to complete on 21 December. ING received a €10 billion capital injection from the Dutch government in 2008 and guarantees on €21.6 billion of US mortgage-related assets this year.

11 Dec

Czech Republic

AnaCap Financial Partners, Banco Popolare Ceská Republika

Acquisition

European private equity house AnaCap Financial Partners is to acquire Banco Popolare Ceská Republika, the seven-branch-strong Czech subsidiary of Italy’s Banco Popolare, subject to due diligence and regulatory approvals.

10 Dec

Cyprus

Piraeus Bank, Marfin Popular Bank

Denial of merger rumours

Greece’s Piraeus Bank has denied local press reports linking it with a merger with Cyprus-based Marfin Popular Bank.

10 Dec

Angola

BES, BES Angola, Portmill

Sale of business unit

Portugal-based BES has completed the sale of a 24 percent stake in BES Angola to Portmill (an Angolan investor) for $375 million. Following the deal, BES will retain a stake of 51.94 percent in the Angolan lender.

10 Dec

France

Société Générale, Dexia, Credit du Nord

Stake increase

Société Générale has reached an agreement to buy the remaining 20 percent it does not own of French regional retail bank Crédit du Nord from Belgian-based Dexia, in a deal valued at around €600 million ($885.8 million) to €700 million.

10 Dec

Poland

Noble Bank, GMAC Bank Polska

Purchase of business unit

Polish-based Noble Bank has agreed a deal to buy GMAC Bank Polska from US-based GMAC. Noble will pay 95 percent of the book value of the assets, estimated to be around $46 million, as of 31 July.

9 Dec

Luxembourg

Dexia

Possible sale of business unit

Under pressure to shed businesses after receiving a €6 billion ($8.9 billion) government bailout last year, Belgian-headquartered Dexia is weighing up plans to sell its Luxembourg-based wealth management unit. The division has around €15 billion of private banking assets under management.

8 Dec

Russia

VTB, Sistema-Hals

Stake increase

VTB has exercised an option to acquire a further 31.5 percent stake in Sistema-Hals, Russia’s largest private-sector property developer, taking its stake up to 51.2 percent.

3 Dec

Ukraine

Raiffeisen Bank Aval

Capital raising

Raiffeisen Bank Aval, the Ukraine-based subsidiary of Raiffeisen International, has received a $150 million 10-year loan from the European Bank for Reconstruction and Development to boost its capital base.

2 Dec

UK

Yorkshire Building Society, Chelsea Building Society

Acquisition

The UK’s second-largest building society, the Yorkshire, is to acquire loss-making rival Chelsea Building Society, the country’s fifth-largest, in a deal expected to complete in April 2010. The newly-enlarged group will comprise assets of more than £35 billion ($57.1 billion) with around 2.7 million members served by a branch network of 178 outlets.

1 Dec

UK

Barclays, BlackRock

Sale concluded

Barclays has completed the sale of its asset management arm to US fund manager BlackRock for $15.2 billion, more than $1.7 billion in excess of the sum agreed when it struck the original deal in June.

1 Dec

UK

JC Flowers

Strategy update

US-based private equity group JC Flowers has reportedly set aside up to $2.3 billion to target forced banking divestments over the next 12 months in the UK.

25 Nov

UK

JPMorgan Chase, Cazenove

Stake increase

JPMorgan Chase is to acquire the remaining half of UK stockbroker Cazenove, which it does not already own, in a deal which values the latter at around £2 billion ($3.3 billion).

19 Nov

Czech Republic

KBC

Initial public offering

KBC is to sell a 30 percent to 40 percent stake in its Czech-based subsidiary, CSOB, on the Prague stock exchange in 2010 as part of its restructuring plan (see RBI 623).

18 Nov

Spain

Santander

Merger of business units

Santander is to merge its wealth management and private banking businesses as part of an internal business reorganisation.

17 Nov

The Americas

Country

Participants

Type/value

Description

Date

US

Citigroup

TARP repayment

Citigroup is close to agreeing a deal to repay the US Treasury some of the financial aid it received last year, according to US media reports. The reports suggest that the bank will sell over $10 billion in common stock in order to help fund the repayment.

14 Dec

Venezuela

Assorted banks

Bank failures

The Venezuelan government has stepped up its intervention in the country’s banking sector by shutting an eighth institution in three weeks. The government has alleged widespread regulatory violations took place at the eight banks.

11 Dec

US

Republic Federal Bank, SolutionsBank, Valley Capital Bank

Bank failures

The number of US banks to have failed in 2009 has risen to 133 with the failure of Florida’s Republic Federal Bank, Kansas’ SolutionsBank and Arizona’s Valley Capital Bank.

11 Dec

Argentina

Banco Supervielle

Initial Public Offering

Banco Supervielle, the Argentine institution with 120 branches across the country, is planning an initial public offering in 2011, according to Bloomberg.

10 Dec

US

Bank of America

Capital raising, TARP repayment

Bank of America has repaid $45 billion of Troubled Asset Relief Program funds using $26.2 billion in excess liquidity and the proceeds of a shares offering which raised gross proceeds in excess of $19 billion.

10 Dec

US

New York Community Bank, AmTrust Bank

Acquisition

New York Community Bank has acquired around $12 billion in assets and assumed liabilities of about $21 billion from the failed AmTrust Bank in a deal brokered by the Federal Deposit Insurance Corporation (see page 21).

7 Dec

US

Citigroup, Kuwait Investment Authority

Stake sale

Sovereign wealth fund Kuwait Investment Authority has transferred its preferred stock in Citigroup to common shares and sold the entire holding for $4.1 billion, a 37 percent return on its initial January 2008 investment of $3 billion.

7 Dec

US

AIG

Possible sale of business unit

American International Group, the beleaguered US-based insurer almost 80 percent-owned by the government, is reportedly seeking bids for its International Lease Finance Corporation unit, a division which has a portfolio of around 1,000 aircraft, with a book value of more than $40 billion.

4 Dec

North America

BMO Bank of Montreal, Citi, Diners Club

Acquisition of credit card unit

BMO Bank of Montreal (BMO) has snapped up the North American credit card business of Diners Club from Citigroup, in the process doubling its corporate card portfolio. BMO said the acquisition is expected to add nearly $1 billion of receivables and $7.8 billion of card transactions in 2010. BMO is targeting to close the deal by the end of the first quarter.

24 Nov

US

People’s United Financial, Financial Federal Corporation

Acquisition

Connecticut-based People’s United Financial has agreed a deal worth around $738 million to acquire Financial Federal Corporation in a deal designed to boost its equipment financing business.

23 Nov

US

Citigroup

Possible sale of business unit

Private equity groups, including US-based Blackstone Group, have been linked with a possible deal to acquire Citigroup’s auto loan unit CitiFinancial Auto, which maintains a loan portfolio of around $16 billion.

23 Nov

US

American Express, Revolution Money

Acquisition

American Express has agreed a $300 million deal to acquire online payments startup Revolution Money with the purchase expected to be concluded in early 2010 (see RBI 622).

23 Nov

Asia Pacific

Country

Participants

Type/value

Description

Date

Malaysia

Maybank, Siam City Bank

Stake acquisition denial

Maybank has denied reports that it intends to bid for a stake in Thailand’s Siam City Bank, the seventh largest commercial bank in Thailand.

14 Dec

Vietnam

Maybank, An Binh Bank

Stake increase

Malaysia’s largest bank, Maybank, is to pay $19.3 million to increase its stake in Vietnam’s An Binh Bank from 15 percent to 20 percent . Maybank purchased its 15 percent holding for $135 million in March 2008.

11 Dec

China, India, Malaysia

Royal Bank of Scotland, HSBC

Sale of business units

HSBC is reportedly close to reaching a deal with Royal Bank of Scotland (RBS) to acquire the remaining Asia-Pacific assets – in China, India and Malaysia – being divested by RBS as part of its strategic review.

10 Dec

Mongolia

Anod Bank

Bank collapse

Anod Bank has collapsed into receivership, the second bank in Mongolia to be taken into the control of the country’s central bank in less than a month (see Zoos Bank, below). The performing assets of Zoos and Anod, among 16 commercial banks based in the country, will be amalgamated into a new state-owned lender.

10 Dec

Australia

ANZ, AWB

Sale of business unit

ANZ has agreed a deal to acquire Agribusiness AWB’s Landmark Financial Services unit comprising an A$2.4 billion ($2.2 billion) loan book and deposits of around A$300 million at net book value. ANZ said the deal would boost its strategy to become a leader in agribusiness financial services in Australasia.

8 Dec

Hong Kong

China Pacific Insurance

Proposed initial public offering

China’s third-largest insurer, China Pacific, is planning to raise up to HK$28.3 billion ($3.65 billion) from a Hong Kong initial public offering.

6 Dec

Hong Kong

AIA Group

Proposed initial public offering

The Asian life insurance unit of American International Group, AIA Group, is looking to raise between $5 billion and $10 billion in a planned initial public offering according to a report in The Wall Street Journal.

4 Dec

China

BBVA, China Citic Bank

Stake increase

Spain’s second-largest-bank BBVA has exercised its call option to raise its stake in China Citic Bank by 4.93 percent to 15 percent in a deal worth around €1 billion.

4 Dec

India

Kotak Mahindra Bank

Strategy update

India-based private sector lender Kotak Mahindra Bank is on the look out for a possible acquisition according to local media reports. Uday Kotak, the bank’s executive vice-chairman and managing director said: “In our position, we will buy, we will be consolidators, we are sitting on huge capital. We have surplus capital, our capital adequacy is more than 20 percent and our businesses are generating significant cash.”

4 Dec

Taiwan

ICBC, Cathay Financial

Possible stake purchase

Industrial and Commercial Bank of China is eyeing up a deal to acquire a 20 percent stake in Taiwan’s Cathay Financial for around $3.4 billion in what would be the first direct investment by a Chinese bank into a Taiwan financial group.

2 Dec

Japan

MUFG

Capital raising

Japan’s Mitsubishi UFJ, the country’s largest bank, is to raise up to ¥1.06 trillion ($12 billion) in a share sale expected to be Japan’s largest ever secondary common stock offering.

30 Nov

Mongolia

Zoos Bank

Bank collapse

Zoos Bank, Mongolia’s sixth-largest bank, has been nationalised following the appointment of a receiver.

24 Nov

China

Manulife, ABN Amro TEDA Fund Management

Stake purchase

Manulife, the largest US insurer by market value, has snapped up a 49 percent stake in China-based ABN Amro TEDA Fund Management for $156 million in cash.

23 Nov

Source: RBI

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