Corporate Financier’s Notes
by Aivars Jurcans
Done! And Done
Texas Capital Bankshares and Independent Banking Group, two US regional banks, have agreed on “a merger of equals”. The combined entity will have about USD 48 billion in assets and USD 39 billion in deposits.
Phoenix Group, Europe’s largest owner of life assurance funds closed to new customers, has agreed to buy ReAssure, the British unit of Swiss Re, for GBP 3.2 billion (GBP 1.2 billion in cash and shares in Phoenix representing a 13% to 17% stake).
Source: Reuters, Bloomberg, FT
MetLife, a US life insurer, has agreed to acquire PetFirst Healthcare, a privately-held pet health insurance company. The terms of the deal were not disclosed. PetFirst covers the health costs of about 40,000 pets, while the pet insurance market has been growing at more than 20% annually since 2014 and was estimated to reach USD 1.28 billion in the US in 2018.
Source: Reuters, WSJ
Deals On The Table
Bangkok Bank is said to be emerging as a leading bidder for the almost 90% stake in PT Bank Permata, an Indonesian bank backed by Standard Chartered, with a market value of about USD 2.25 billion. Bangkok Bank is said to be competing with Sumitomo Mitsui Financial Group.
LOLC Holdings, Sri Lanka’s 2nd largest publicly traded company by revenue, is said to be planning to sell its 70% stake in Prasac Microfinance Institution, Cambodia’s biggest micro lender. Prasac had about 400,000 customers and total assets of USD 2.4 billion in 2018 and is said to generate a 30% return on equity.
New York Life Insurance is said to be the leading candidate to acquire a business from Cigna that sells accident, disability and life insurance plans through employers in a transaction that would be valued at as much as USD 6 billion. The other would-be bidders are said to be MetLife and Sun Life Financial.
Source: Bloomberg, FT
DWS, Deutsche Bank’s asset manager, is said to be remaining on the lookout for takeover targets after its talks with peer UBS failed earlier this year.
Deka, a German public sector bank (owned by 12 regional savings banks and serving as an asset manager for all Germany’s savings banks), is said to have decided “to explore closer cooperation” with Helaba, its peer owned by savings banks and the states of Hesse and Thuringia.
UBS, a Swiss bank, is said to be considering a sale of UBS Fondcenter, its fund platform providing access to over 65,000 funds from hundreds of providers of mutual funds, ETFs and alternative investment funds. The sale is expected to fetch at least USD 506 million.
Metrics To Watch
Credit Suisse seeks a return on tangible equity of at least 8% for 2019 (compared with its previous ambition for 10% to 11%) and of 11% for 2020 (down from 11% to 12%).
XP, a Brazilian financial services platform, has priced its Nasdaq listing shares to value it at USD 14.9 billion, or at 60x times its 2019 earnings (a higher multiple than peer digital brokers in the US). Founded in 2001, XP has more than 1.5 million clients and USD 83 billion under management.
Source: Reuters, Bloomberg
Deutsche Bank’s common equity tier one ratio stood at 13.4% at the end of September. It is expected to remain above 13% this year, but will fall to 12.7% in 2020. The European Central Bank will lower Deutsche’s minimum regulatory requirement in January 2020 from 11.84% to 11.59% as the bank’s balance sheet has become less risky.
New Zealand will require its 4 biggest banks to raise their tier one capital ratios to 16%, while smaller banks will have to hold 14% in tier one capital. The new rules will require banks to hold an extra USD 13.1 billion in capital by 2027.
Follow The Money
Centricus, a UK investment firm with more than USD 25 billion in assets, has formed a JV with Chris Milner, a former Goldman Sachs partner. European Insurance Consolidation Group will focus on acquiring and managing legacy life insurance and annuities portfolios across Europe, targeting about USD 100 billion of assets under management.
Landbay, a UK peer-to-peer property lending platform, has returned all funds to its 3,700 retail investors and will focus exclusively on facilitating loans for financial institutions. Landbay has lent more than GBP 430 million since it was founded, including GBP 190 million in 2019.
For the top 10 banks in Europe by market cap, staff numbers have fallen by 20% since 2008 to 1.1 million, whereas the fall is roughly 7% for the top 10 in the US.
A Thought Worth Noting
“There are plenty of good deal lawyers in the world who, when confronted with challenging facts, will tell a client that it is impossible to complete a transaction.”
Frank Aquila, partner, Sullivan & Cromwell
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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.