Johannesburg | Monday
SOUTH Africa’s Nedcor said on Monday it was offering R7,3-billion in cash and shares for troubled rival BoE in an agreed deal that would form the country’s biggest bank.
Ending weeks of market speculation, Nedcor said the offer valued BoE at R3,43 per share, a 10% premium over BoE’s Friday closing share price of R3,11. BoE shares jumped nine percent in early trade on Monday to R3,39. Nedcor was 2,3% up at R132 in a firm sector.
BoE’s board said it was recommending to shareholders that they accept the offer of R280 in cash and 0,4854369 Nedcor shares per 100 BoE shares.
”Up to an additional R10 per 100 BoE ordinary shares may also be payable in cash,” the groups said in a joint statement.
”In the circumstances, the BoE Board is firmly of the opinion that the interests of stakeholders are best protected by BoE entering a transaction with an appropriate larger financial institution,” it added.
Official sources said the government, which blocked Nedcor’s bid for big rival Standard Bank two years ago, would have no objection to the BoE deal.
BoE said it received the Nedcor offer at around 1100 GMT on Sunday and the details were finalised late on Sunday evening. No other offers were on the table, it said.
BoE effectively put itself up for sale last month, saying it would consider offers for the company after the government guaranteed deposits following a run at the Cape-based bank.
”It’s essentially what the market was expecting…it’s price-to-book times 1,1 which is very reasonable for a banking share. I think in terms of the assets it’s a good fit. The two will complement each other,” said Greg Goeller at SG Securities.
But JP Morgan Chase analyst Jacques Badenhorst said: ”I don’t think it’s a great fit. There are components of BoE… asset management, private banking, the life operations and BoE corporate would be good, but the rest is not so great.”
The transaction, if completed, would give Nedcor an aggregate asset base in excess of R240-billion and an earnings base of around five billion rand. It would make the merged bank the country’s largest by market value, according to current valuations.
The BoE deposit run came weeks after financial authorities appointed a curator or administrator to manage peer Saambou after depositors, nervous about the bank’s exposure to the risky, small loans sector, pulled one billion rand from accounts in a few days. – Reuters