GE Money Bank seeks lower than expected valuation for Prague IPO

GE Money Bank seeks lower than expected valuation for Prague IPO
US giant GE has been trying to offload its Czech banking unit for more than a year
By bne IntelliNews April 25, 2016

US giant GE will seek a valuation of CZK35bn-43bn (€1.3bn-1.6bn) during its planned IPO of Czech lender GE Money Bank in Prague, a company statement announced on April 25.

After more than a year of trying to sell the sixth biggest bank in the Czech Republic by assets, GE surprised earlier this month when it announced plans to list the entire bank on the Prague Stock Exchange. Concern that the listing could struggle on the sleepy bourse - particularly with energy group EPH also planning a large IPO - may be behind an apparent pullback on the valuation. There has also been speculation that the IPO is intended to push suitors for the bank to raise their bids.

The IPO will see the bank offer 260.61mn shares, constituting a 51% stake, in a first round sale. Final pricing is expected on or around May 5, with conditional trading starting the following day.

The bank issued an initial price range of CZK68-85 for each of the 511mn shares it plans to eventually sell on the Prague bourse. At the mid-point, that implies a market capitalisation of CZK39bn, the statement points out. At the upper end of the range it would offer a valuation of CZK43bn.

Analysts had earlier suggested the IPO could seek a valuation of CZK40bn-60bn. Unnamed sources from the investment banks preparing the offer - Goldman Sachs, J.P. Morgan, Citigroup and Wood & Co. - later added weight to those estimates as they told local press the offer could raise up to CZK40bn-56bn. The mid-point of the actual pricing range would clearly fall just short of the bottom estimate.

The bank has an equity value of CZK27.3bn, GE Money Bank said during its original announcement of the IPO. However, ahead of the deal it will pay a CZK4.5bn dividend to GE Capital International.

Analysts note the current risks of the low interest rate environment and rising competition, but also suggest the bank is interesting thanks to its dividend policy and offer of exposure to reviving Czech consumption. If successful, GEMB will join Komercni Banka, Erste Bank and Vienna Insurance Group (VIG) on the PSE, granting the financial sector a huge weighting.

GE Money Bank has nearly 1.17mn retail and commercial customers (over 11% of the Czech population) and the fourth largest network of branches (229) – many serving under-serviced Czech cities and towns, where it sees a chance for making greater inroads.

“We are pleased to be launching our planned IPO today after a strong initial response from institutional investors. In another important milestone towards becoming an independent Czech bank, we are today also announcing our new corporate name and brand, Moneta Money Bank,” CEO Tomas Spurny said in the April 24 statement. The prospectus will be posted on April 25.