Rabobank extends high-priced offer for Polish agricultural bank

By bne IntelliNews May 24, 2012

Tim Gosling in Prague -

Rabobank announced on May 23 that it is extending its offer to buy out the remaining 40% in Polish agricultural lender Bank BGZ. Blaming the long wait for approval from the regulator, the extension of the sky-high offer is just the latest twist in an intriguing story.

Analysts told bne last month that the April 12 offer, which saw the Dutch co-operative bank tender PLN1.25bn (€287m) for the remaining shares in BGZ, "must involve some kind of deal with the Treasury Ministry."

The tender price of PLN72.5 per share offered a 54% premium to the share price on the Warsaw Stock Exchange, but BGZ's share price has, understandably, since risen to PLN71.6. Yet Rabobank has moved the subscription deadline - originally scheduled to end on May 31 - to the end of June, Reuters reports, with the bank apparently claiming that delayed approval from financial regulator KNF is behind the move.

The offer is open to the Polish state, which holds 25% in BGZ, and holders of the 15% free float. Warsaw listed a 12% stake in response to its failure to offload Rabobank a year ago. Therefore, it's hard to imagine another scenario but an agreement between Rabobank and Warsaw given the excessive price of the offer, which makes the delay on approval of the deal rather curious.

As analysts at Raifeissen pointed out in April, the offer was a no-brainer for investors, and valued the small, specialist BGZ far higher than Santander's February acquisition of Kredyt Bank, via a merger with Bank Zachodni WBK, to create Poland's third largest bank, for instance. "The [price/book] multiple of the expected transaction amounts to 1.1x for 5% [return on equity]," the analysts wrote, "which is much more favorable than 1.4x multiple for Kredyt Bank, which earns [around] 8% ROE. We recommend to participate in the offer."

The high price of the tender is even more surprising given Rabobank's struggles. The Dutch bank is now joining the growing ranks of European banks looking to offload assets in a bid to raise capital ratios. On May 21, it was reported that Rabobank is preparing to kick off an auction of asset manager Robeco within a fortnight.

Regarding the BGZ offer, Rabobank said in April that it intends to strengthen its existing strategy in servicing clients in the food and agriculture sectors and retail banking in Poland. It also said it intends to maintain the bank's presence on the WSE - "with a minimum free float," the Raifeissen analysts suggested - all of which appears to conform to KNF's usual conditions for takeovers by foreign investors in recent years.

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