Greece's third-largest lender Alpha Bank has turned down an all-share offer by market leader National Bank (NBG), despite government calls for sector consolidation.
NBG took the market by surprise last week with its proposal to form a national champion with a market value of 9.7 billion euros that would rank among the 30 largest banks in Europe.
Alpha said the unsolicited offer was not beneficial to its shareholders, possibly opening the way for a takeover battle.
Following are scenarios of possible outcomes:
NBG IMPROVES OFFER, DOES DEAL
NBG is sticking to its 8-for-11 share offer, insisting that it has compelling merits and big synergies. But analysts do not rule out the possibility of a sweeter offer down the line, which could bend Alpha's resistance.
To succeed, the deal will also need regulatory and NBG shareholder clearance as it could raise potential anti-trust issues. The combined bank would have a 35 to 40 percent market share in mortgages and deposits.
A bigger entity would have improved capacity to raise funds in equity markets and open the spigots of the interbank market. Greek banks, weighed down by government bonds, have been effectively shut out of wholesale funding during the country's debt crisis and depend on the European Central Bank.
ALPHA YIELDS TO POLITICAL PRESSURE
Greece's socialist government has strongly encouraged banks to pursue tie-ups to better cope with the crisis and help the economy turn around. Some officials slammed Alpha for turning down the deal and the government is expected to exert pressure to keep negotiations going.
The state holds 940 million euros of preferred shares in Alpha bank under a liquidity support scheme, which gives it some powers of veto over policy.
Alpha cited concerns over NBG's relatively bigger exposure to government paper and said the offer was not a fair reflection of its real value in a depressed market.
But analysts said objections may also come from management over positions in the new bank, an issue that scuppered an agreed merger deal between the two in 2001.
FOREIGN BUYER STEPS IN
Analysts say it is unlikely that a foreign bank will get involved as long as the shadow of Greek debt restructuring persists. Markets fear that, despite Greek fiscal efforts, some sort of debt relief will be needed down the road, with haircuts for Greek bonds. It would be hard for a foreign player to convince its shareholders of the merits of spending billions on a Greek bank. In-market consolidation with paper deals is widely seen as the more likely path.
"You can buy a small Italian bank at 0.5 times book value," one analyst said.
DEAL FLOPS BUT CONSOLIDATION IS LAUNCHED
Even if the deal flops, analysts say the bid has set the ball rolling for Greek banking consolidation. Second-largest lender EFG Eurobank has recently sold its stake in a Polish unit and could be weighing a move, possibly with state-owned Hellenic Post Bank (TT), in which it owns about 10 percent.
Piraeus Bank, which has already made an offer for ATEBank and TT but later withdrew it, is expected to seek partnerships. Meanwhile Cypriot lenders Marfin Popular and Bank of Cyprus may not stay on the sidelines if others make a move.
source: REUTERS
