Corporate Financier’s Notes
by Aivars Jurcans
Deals On the Table
Berkshire Hathaway is said to have requested permission from the Federal Reserve to increase its stake in Bank of America above 10%.
Abry Partners, a Boston-based private equity group, is said to be working on sale of its majority stake in Hilb Group, a Richmond-based insurance broker. Hilb generates EBITDA of around USD 75 million and by applying the traditional multiples for brokerages (13x-15x times EBITDA) is expected to be valued at around USD 1 billion.
HSBC is said to have retained Lazard to advise on a sale of its French retail business. The retail operation in France has 270 branches and is expected to be worth about EUR 1 billion.
AXA, a French insurer, is said to be considering selling its Central European business as part of a restructuring to withdraw from markets where it lacks scale. Its businesses in Poland, Czech Republic and Slovakia could potentially be worth between EUR 400 million and EUR 800 million.
Commerzbank is said to be sounding out potential buyers of its stake in mBank, a Polish lender. A formal sales process is expected to launch in the coming months. mBank is the 4th largest bank by assets in the country and Commerzbank expects that its 69.3% stake could be worth about USD 2.65 billion.
Thanks, But No Deal
The shareholders in Latitude Financial Group, an Australian non-bank consumer lender, have decided not to proceed with an IPO which could have raised about USD 703 million, citing worries about how the company would trade on debut as the reason.
Societe Generale, a French lender, is said to have scrapped its plan for a securities JV in China in favour of a wholly-owned subsidiary.
Metrics To Watch
Citigroup has reported return on tangible common equity of 12% year to date, and aims for an improvement to 13.5% in 2020. Its shares trade at less than a book value of net assets.
Follow the Money
UniCredit, an Italian lender, is said to have informed the European Central Bank that it may create a German holding company to control part of its business. The move is expected to reduce funding costs and help to shield the bank from any potential crisis in its home market.
Revolut, a UK-based fintech, is said to be seeking to raise as much as USD 1.5 billion in additional financing – USD 500 million in new equity and a concurrent USD 500 million convertible loan.
According to the International Monetary Fund, about USD 15 trillion of public and private sector bonds have negative yields, implying that investors are willing to receive less when the bonds mature than they paid for them.
Berkshire Hathaway held nearly USD 100 billion in financial services stocks as of June 30, and 6 of its 10 top stockholdings were financial companies.
According to the Bank for International Settlements, the cross-border lending by banks to non-bank financial institutions, such as hedge funds, has increased from USD 4.8 trillion in 2016 to USD 6.6 trillion in 2019.
A Thought Worth Noting
“While it’s slower growth, it’s still growth. The US consumer is incredibly strong.”
James Dimon, CEO, JPMorgan
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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.