Corporate Financier’s Notes by Aivars Jurcans
Done! And Done
Nubank, a Brazilian digital bank, has acquired Easynvest, a Brazilian broker. The value of the transaction was not disclosed. Easynvest is said to have 1.5 million customers.
Aviva, an insurer, has agreed to sell a majority stake in its Singapore business to a consortium led by Singapore Life for USD 2 billion. Aviva is expected to retain a 25% stake in the new company, Aviva Singlife, which will combine the two insurers’ businesses.
Deals On The Table
Caixabank, a Spanish lender, is said to be considering a bid for Bankia, a state-controlled (with 61.8% of shares) Spanish lender, that could value it at around EUR 4 billion, a 15% to 22% premium over the average share price in the last 3 months. The combined bank will have assets of about EUR 600 billion.
Industrial and Commercial Bank of China (ICBC) is said to be aiming to raise up to USD 4.4 billion in additional tier one perpetual offshore preference shares.
Punjab and Maharashtra Co-operative Bank (PMC), an Indian lender taken under the control of the Reserve Bank of India because of “financial irregularities” in 2019, is said to have “tried to engage with the major banks of the country to request for a merger”.
PKO BP, a Polish state-run lender, is said to be considering a share buyback. PKO has a market capitalisation of USD 7.17 billion.
UBS Group and Credit Suisse Group are said to be exploring a potential merger to create one of the Europe’s largest banks. A potential deal which could happen by early 2021 could result in potential job cuts equal to between 10% and 20%, or 15,000 or more worldwide.
Euronext NV, an exchange operator, in a consortium with Cassa Depositi e Prestiti, an Italian state-owned lender, is said to be preparing to submit a bid for Borsa Italiana. The offer could value the business at about EUR 3.5 billion to EUR 4 billion. Borsa Italiana is seen as a strategic asset in Italy due to its ownership of MTS SpA, a platform used to trade government bonds.
A consortium led by Arch Capital Group, an insurer, is said to have made an approximately USD 500 million offer to acquire Watford Holdings, a reinsurer. Watford offers property and casualty insurance and reinsurance services.
Banco de Sabadell, a Spanish lender based in Alicante, is said to be exploring strategic options “including a sale or merger, asset disposals or buying a smaller competitor”. Sabadell has a market value of about EUR 2.2 billion.
Metrics To Watch
Handelsbanken, a Swedish lender, is said to be planning to close 180 of its 380 branches. This is estimated to save the bank more than USD 307 million annually. Handelsbanken’s cost-to-income ratio is around 50%, while its shares are trading at a little over its tangible book value.
Citigroup’s return on equity has increased from 2% in 2012 to above 10% in 2019 as a result of cost-cutting.
Klarna, a Swedish “buy now, pay later” group, has raised USD 650 million in a funding round that valued the company at USD 10.65 billion. At the previous funding round in August 2019 Klarna was valued at USD 5.5 billion.
The Money Trail
CNP Assurances, a French insurer, is said to have agreed to fund the acquisition of the water activities of Suez in France by Meridiam, a French investment firm.
Perella Weinberg Partners, an investment bank, is said to be planning to set up a blank-check company that focuses on finding a business owned and led by women. The company will seek to raise about USD 200 million and will focus on targets in consumer products and services, health and wellness and financial technology.
According to Citigroup research, once lower corporate tax rates are factored into valuations, the top 10 US tech companies are trading at a trailing 12-month price-to-earnings ratio of 75x times, almost precisely in line with the turn of the century dot-com bubble.
A Thought Worth Noting
“[Milton] Friedman’s timeless essay [“The Social Responsibility of Business Is to Increase Its Profits”] resonates today as corporate America embraces “stakeholder capitalism”, a popular concept that is inconsistent with the law. Stakeholder capitalism distorts the incentive that prompts investors to risk their capital: the promise of a profit on their investment. So, I share Friedman’s concern that a movement toward prioritising ill-defined “stakeholders” might allow some executives to pursue personal agendas – or simply camouflage their own incompetence (until it is starkly revealed by poor shareholder returns).”
Daniel Loeb, chief executive, Third Point
To receive your personal weekly copy of Banking M&A Digest please subscribe at http://eepurl.com/gepqdP
Aivars Jurcans has more than 20 years of corporate finance and investment banking experience. His services are currently available through MURINUS ADVISERS.
Design by Artis Briedis, Photo by Joe Taylor on Unsplash