Portugal’s Banco Português do Investimento (BPI) has proposed a friendly merger with the country’s largest private-sector banking group, Millennium BCP, in a reversal of BCP’s €5.32 billion ($7.2 billion) hostile bid for BPI. That bid failed in May after less than 4 percent of BPI’s shareholders took up the offer.
A statement from BCP in response to the proposal said: “The executive board considers inadequate and unacceptable the terms of the offer presented [as it] does not create significant value for shareholders.”
BCP has, however, said that it is prepared to begin talks with BPI.
There has been renewed market discussion regarding a BCP-BPI tie-up (see RBI 580). BPI has increased its own share of BCP’s capital and now owns 6.26 percent of BCP (its employees pension fund controls a further 2.6 percent) and has declared that it now has a “strategic interest” in the larger group.
If successful, a merged BPI-BCP would create a Portuguese group with a market capitalisation of around €16.7 billion, making it the Iberian Peninsula’s third-largest bank after Spain’s Santander and BBVA. BCP and BPI together have assets of €125 billion, 1,500 branches and 18,000 employees.
BPI has offered BCP a 1:2 share swap, valuing BCP at around €12.1 billion. The merger proposal, if accepted by BCP, would result in BCP shareholders controlling 70.4 percent of the new bank and BPI 29.6 percent.
However, the executive committee of the new bank – to be known as Banco Millennium BPI – would have a majority of five to four in favour of BPI, effectively giving them management control.
“What we want to create is a Portuguese bank that is independent, with an international reach and with the decisions being made here in Portugal,” said BPI’s chief executive, Fernando Ulrich, in a statement.
According to investment bank Keefe, Bruyette & Woods, a merger would generate around €146 million net synergies after tax in three years (12 percent of combined costs and 2 percent revenue attrition), adding some 8 percent to 2009 net profits.
Ulrich has said he does not intend to sell any assets in the new bank other than those required by the Portuguese competition regulator to approve the merger.
Other bidders A counter bid for BCP from another suitor cannot be ruled out but would face considerable hurdles, as BCP’s statutes require a buyer acquires at least 90 percent of the shares plus one in order to succeed. BBVA and Santander have been mentioned by the market as possible bidders, as has Banco Sabadell.