Banking M&A Digest #19

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My weekly summary notes on banking and financial services - 

by Aivars Jurcans

Buying, Selling, Merging

Deutsche Boerse has agreed to acquire Axioma, a US risk and portfolio analytics provider, with a view to merge it with its own data subsidiary, the owner of Stoxx and Dax equity indices. The deal is said to be based on Deutsche Boerse’s index business value of EUR 2.6 billion and Axioma’s enterprise value of USD 850 million.

Source: Financial Times

YieldStreet, a digital wealth management platform backed by George Soros, has agreed to acquire Athena Art Finance, a lender to buyers of artwork by selected artists, in a transaction valued at USD 170 million. Athena has provided over USD 225 million (up to 50% of the value per piece) in financing for art buyers since its inception in 2015.

Source: Financial Times

Morgan Stanley has purchased additional 5.5% of shares in Morgan Stanley Huaxin Fund Management for USD 3.7 million increasing its stake to near 43% and becoming the largest single shareholder. The transaction where Morgan Stanley became the winning bidder was an auction conducted by a court on Taobao, the online marketplace owned by China’s ecommerce group Alibaba.

Source: Financial Times

Principal Financial group, a US retirement plan administrator, has agreed to acquire Wells Fargo retirement plan services business for USD 1.2 billion. The combined business is said to become one of the largest retirement services providers in the US with 7.5 million customers.

Source: Reuters

Hargreaves Lansdown and the Share Centre have agreed to acquire GBP 1.5 billion in assets and take on 53,000 clients from JPMorgan Asset Management, which is said to be winding down its direct-to-consumer role to focus on fund management.

Source: Financial Times

Deal Ideas In Process

Deutsche Boerse, the operator of Frankfurt Stock Exchange, is said to be in “concrete negotiations” to acquire certain foreign exchange business units from Refinitiv, a provider of financial information.

Source: Reuters

Mediobanca, an Italian investment bank, is expected to announce the acquisition of 66% of shares in Messier Maris & Associes, a French merchant bank, in a transaction which is said to be based on a valuation of EUR 160 million for 100% of shares.

Source: Reuters

Dubai Islamic Bank, the UAE based sharia-compliant bank, is said to be in talks to acquire Noor Bank, s smaller rival. If completed, the deal would create a lender with USD 75 billion in assets. 

Source: Reuters, Bloomberg

When Deutsche Meets Commerzbank

Deutsche Bank and Commerzbank are said to favour a straightforward merger over more complex deal structures. According to Reuters’ sources, a share offer from Deutsche for Commerzbank is preferred to the creation of a new holding company.

Source: Reuters

Valued By Markets

Network International, a Dubai-based Middle Eastern payments group, completed its IPO on LSE at a valuation of GBP 2.2 billion.

Source: Financial Times

Societe Generale’s, a French bank, common equity tier 1 ratio stands at over 11% and additional EUR 8 billion in capital might be needed to increase it to 12%. The bank has missed its return targets of 11.5% and is aiming at a return on tangible equity between 9% and 10% by 2020.

Source: Financial Times

Investing And Retrenching

Societe Generale, a French bank, plans to eliminate EUR 500 million in costs by reducing its workforce by 1,600 employees. Most of the staff cuts (c.1,200) are planned on the investment banking side of operations. 

Source: Financial Times

New Tricks

Nationwide, the UK 2nd largest mortgage lender with 14 million customers, has launched equity release mortgage (no interest loan which is repaid upon the sale of house after the borrower dies or moves into long-term care) and retirement interest-only mortgage (interest to be paid over a fixed period while the principal is to be repaid upon the sale of house) products targeted at the “later-life borrowers” (defined as those over 55).

Source: Financial Times

Interactive Investor, the UK investment platform with GBP 20 billion in assets under management, has moved to adopt a “Netflix” pricing model which will replace the quarterly charges. The new model is said to provide 3 options ranging from GBP 9.99 for “core investor” to GBP 19.99 per month for “super investor”.

Source: Financial Times

Up-And-Comers

Branch International, a US startup that offers loans to first-time borrowers and customers without bank accounts in Africa, India and Mexico, has raised USD 170 million (in a combination of equity and debt) in new financing. Branch expects to lend USD 350 million in 2019, usually in loans of USD 20 to USD 40.

Source: Financial Times

 Exciting Numbers

According to the data provider Prequin, 3,749 private equity funds were in the process of raising new money in January 2019. Private equity managers expect to raise close to USD 1 trillion this year.

Source: Financial Times

The return on allocated capital for Danske Bank’s non-resident business in Estonia was 402% compared with 7% for the bank as a whole in 2013.

Source: Financial Times

Thoughts Worth Noting

“Part of the structural weakness [of European banking] is caused by this overcapacity in banking, which is not overcapacity in the production of credit, it’s overcapacity in terms of the number of people, the number of branches, costs.”

Mario Draghi, president, European Central Bank

“Art financing is an attractive asset class with typically low correlation to the stock market and low loan-to-values.”

Milind Mehere, co-founder and CEO, YieldStreet

See you again next week!

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Aivars Jurcans has more than 20 years of corporate finance and investment banking experience. His services are currently available through MURINUS ADVISERS .

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