Banking M&A Digest #62 (20.2.2020)

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Corporate Financier’s Notes  

by Aivars Jurcans

Done! And Done

Franklin Resources has agreed to acquire Legg Mason, another active fund manager, in a deal valued at nearly USD 4.5 billion (valuing Legg Mason at 12.5 times its forward earnings). The transaction will create a firm with a combined USD 1.5 trillion in assets. 

Source: Bloomberg, FT

Ally Financial, an auto lender, has agreed to acquire CardWorks, a privately held non-prime credit card and consumer finance lender, for USD 2.65 billion (USD 1.35 billion in cash and USD 1.3 billion in common stock). CardWorks has USD 4.7 billion in assets and USD 2.9 billion in deposits.

Source: Reuters

LendingClub, a San Francisco-based peer-to-peer lender, has agreed to acquire Radius Bank, a Boston-based digital lender, in a cash-and-stock deal valued at USD 185 million. Radius has more than USD 1.4 billion in assets and offers checking and savings accounts online. LendingClub expects the deal would allow it to save USD 40 million a year in bank fees and funding costs.

Source: Reuters

Jupiter Fund Management, a UK money manager, has agreed to buy Merian Global Investors, its rival, for an initial GBP 370 million in shares. The deal will create a group with GBP 65 billion of assets under management and the 2nd biggest manager of retail funds in the UK.

Source: FT, Reuters

Deals On The Table

Amigo, a UK subprime lender, is said to be talking to “potential buyers” after launching a strategic review and sales process in January 2020.

Source: Reuters

Intesa Sanpaolo, an Italian lender, has launched a EUR 4.86 billion takeover bid for UBI Banca, its rival. If successful, the combination would create the 7th largest bank in the eurozone with EUR 1.1 trillion in assets.

Source: FT

Nomura Holdings, a Japanese firm, is said to be exploring a potential sale of Nomura Asset Management Taiwan, its Taiwanese asset management unit. Nomura is said to be seeking a deal to value the business at about USD 500 million. 

Source: Bloomberg

Investec, a South Africa-based banking group, is said to be pressing ahead with the spin out of Ninety One, its renamed asset management unit. Ninety One, which has GBP 121 billion of assets under management, will be floated in London and Johannesburg and intends to have a free float of 60-65%.

Source: Reuters

NIBC, a Dutch bank, is said to be “in advanced talks” over a buyout proposal from Blackstone, a US private equity firm, that values the lender at EUR 1.44 billion. NIBC, which serves 600 small businesses and 400,000 retail customers, reported a net profit of EUR 82 million for H1 2019.

Source: Reuters

SelectQuote is said to be considering an IPO that could value it at more than USD 2 billion, including debt. Established in 1985, SelectQuote is an owner of the eponymous insurance policy comparison website. 

Source: Reuters

Thanks, But No Deal

Societe Generale, a French bank, is said to have scrapped a proposed sale of Kleinwort Hambros, its UK private bank, after several suitors dropped out from the process. Kleinwort Hambros managed GBP 14 billion of assets as of the end of 2018.

Source: Bloomberg

Commerzbank, a German lender, will proceed with the sale of its 69% stake in mBank, a Polish lender, only “if we get the right price”, according to its CFO.  Non-binding bids have been received from Bank Pekao, a Polish state-controlled lender, and Apollo Global Management, a US private equity firm. mBank generated a 12.5% return on equity in 2019.

Source: Bloomberg, FT

Metrics To Watch

HSBC expects to increase its return on tangible equity from 8.4% in 2019 to between 10% and 12% by the end of 2022.

Source: FT

Royal Bank of Scotland (soon to drop its 300-year old company name and rebrand as NatWest), which still has the UK government as its biggest shareholder (with 62%), has lowered its target return on equity to between 9% and 11% in “the medium to long term”. Its cost-to-income ratio is 65%.  

Source: FT

Credit Agricole’s, a French bank, core equity tier 1 ratio increased to 12.1% at the end of December 2019.

Source: FT

Commerzbank’s common tier one equity ratio rose to 13.4% in 2019, exceeding the analysts’ expectations.

Source: FT

AIG property and casualty insurance (P&C) business unit’s combined ratio (claims and overhead costs as a percentage of premium revenue) for 2020 is targeted at about 94.3% versus 96% in 2019 (a combined ratio of greater than 100 represents an underwriting low).

Source: FT

Barclays, a UK bank, return on tangible equity for the group hit 9% in 2019, up more than a half in 3 years.

Source: FT

Follow The Money

Mitsubishi UFJ Financial Group, a Japanese bank, is investing more than USD 700 million in Grab, a Southeast Asian ride-hailing company.

Source: Bloomberg

Up-and-Comers

Metro Bank’s, a UK challenger bank, shares are trading at 0.2x times its tangible book value.

Source: FT

Exciting Numbers

Over the past decade, US equity index mutual funds and ETFs have taken in about USD 1.6 trillion, while their active counterparts lost approximately USD 1.4 trillion, according to the Investment Company Institute and Bloomberg Intelligence data.

Source: Bloomberg

A Thought Worth Noting

“European capital markets are still not fit for purpose. They are neither large nor deep enough to support economic growth or to buffer it in hard times. Brexit amplifies the challenge.”

Colm Kelleher, former president, Morgan Stanley

 

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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.

Photo by Joe Taylor on Unsplash

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