Yesterday, NLB’s Management held a presentation regarding its offer for the takeover of Addiko. In this quick overview, we’re bringing you the main highlights.
First of all, NLB noted that the acquisition of Addiko would offer many synergies, both increasing their market share (for example, in Slovenia by over 2.5%, in Serbia by app. 2%, in Montenegro by 2.5%, in Bosnia & Herzegovina by 10% (in Republika Srpska) and app. 4% (in B&H Federation). At the same time, it would allow them to enter the Croatia market indirectly acquiring 2.8% of the market share.
NLB also finds that Addiko would offer synergies in terms of the business model. The Management commented that with Addiko, they could take a dual path: either full/partial consolidation, or a dual brand strategy (depending on the market).
Regarding the offer itself, NLB seeks to gain full control of Addiko, representing a clean and full exit opportunity for all shareholders. They also commented on their previous M&A track record, which has demonstrated that they are both able to acquire, but also integrate banks in the region (e.g. Serbia, Slovenia). The EUR 20 per share offer represents a 36.6% premium over the 3-month VWAP and a 5% premium over the price prior to the NLB announcement.
NLB noted that this represents an offer that is better than any currently competing offers. Furthermore, and probably one of the most important things that the Management said is that one of the main conditions for the M&A is a 75% control threshold, below which they would not want to go. NLB also noted that their robust levels of capital and liquidity will allow the transaction to be financed from existing resources.
In terms of the offer timeline, it was launched on 7 June 2024, and the end of the acceptance period is 16 August 2024. Furthermore, NLB has a 2nd, additional acceptance period starting on 20 August 2024, but this is only applicable if a 75% acceptance threshold is reached, and all other conditions (except regulatory and merger control clearances) have been fulfilled. Regarding other conditions, these include no changes in Addiko’s registered share capital, no loss of license, and no insolvency. No sale of all of its current banking business or any of its subsidiaries with a banking license. No breach in regulatory capital requirements for a period longer than one month without implementing any recovery measures to meet the regulatory requirements again within a period of 3 months. No significant compliance breach, and no significant decrease in the Euro Stoxx Banks Index.
If these conditions are met, the 2nd acceptance period begins, with 20 November 2024 being the end of the additional acceptance period. Furthermore, regulatory and supervisory approvals have 30 June 2025 as the date until which they have to be made for the transaction to go through.
In terms of the Q&A, from the side of regulation, several different questions regarding the entry into the Croatian market were made, especially tied to the legacy issues. NLB’s Management noted that NLB has been a privately owned business with a highly diversified shareholder base, and they find that it is in the interest of the Croatian economy, companies, as well as regional economies and companies that the regulatory approvals go through. The only thing that could stop it in their view, is a political decision.
Questions were also asked what would be done if the deal did not go through. NLB noted that their business strategy until 2030 entails significant organic growth and 2 strategic plays, and in Addiko they saw an opportunity to achieve their strategy faster. They are focused on the deal being made and going through, but if it doesn’t occur, they noted that this would not have a large impact on the Group or their plans. By 2030, they aim to obtain EUR 5-6bn through M&A, which Addiko would fulfill if acquired. However, other expansions, for example, Slovenia, Serbia, Bosnia & Herzegovina, and Albania could be made, even excluding the Addiko deal’s success.
In terms of the impact on regulatory requirements, they will fulfill the CET1 requirement even if Addiko is acquired, while only falling slightly short of the Tier 1 (15%) requirement. They also noted that the gap produced would be supplemented by additional tier 1 (AT1) bond issuances and that the market has been quite receptive to these issuances. Also, this acquisition should not have a material effect on dividend payments, if any.
Finally, in terms of integration, NLB noted that if the deal is closed by the latest date (30 June 2025), they expect that the integration would take up to 18 months, with some Addiko subsidiaries (depending on the country) even taking less time.
NLB, SBITOP share price (2020 – 2024 YTD, %)
Source: Bloomberg, InterCapital Research
According to the latest report on the Romanian GDP, in Q1 2024, it grew by 0.4% QoQ, and 1.8% YoY, amounting to RON 416.3bn, or EUR 83.6bn.
Last week, the Romanian Statistical Office released its first detailed report on the movements of the Romanian GDP, for Q1 2024. During the quarter, the Romanian GDP amounted to RON 416.6bn at the current prices. In real terms (and working days and seasonally adjusted) this represents an increase of 0.4% QoQ, as well as 1.8% YoY.
Seasonally adjusted quarterly YoY GDP development (Q1 1996 – Q4 2024, %)
Source: Romanian National Institute of Statistics, InterCapital Research
Breaking the GDP change down by categories, information, and communication, with 8.9% of GDP, recorded volume growth of 2%, leading to 0.2 p.p. contribution to YoY GDP growth. Shows, culture and recreation activities; repair of household goods and other services, with a share in GDP of 2.6%, also contributed 0.2 p.p. due to a 7% volume growth. Next up, public administration and defence; social insurance of the public sector; education; health and social assistance, with a share of 15% of GDP, recorded 0.9% volume growth, leading to a 0.1 p.p. GDP increase. Lastly, net taxes on products, with an 8.3% share in GDP, recorded a volume increase of 6%, leading to a 0.6 p.p. increase in GDP. On the other hand, Industry, which has an 18.3% share in GDP, recorded a 1.1% volume decline, leading to a negative 0.2 p.p. contribution to GDP change YoY.
Furthermore, looking at the more used breakdown of GDP (consumption, gross fixed capital formation, etc.), the final consumption expenditure of households contributed 2.2 p.p. to GDP growth, due to a 3.3% increase in volume. Individual final consumption expenditure of General Government, whose volume increased by 3.9% YoY contributed 0.3 p.p. to the GDP growth rate. Collective final consumption of General Government also recorded similar growth rates, with a 4% volume increase, leading to a 0.4 p.p. GDP growth. Next up, gross fixed capital formation contributed 1.3 p.p. to GDP growth rate, due to a 6.6% increase in volume.
On the other hand, the only category that negatively contributed to GDP this quarter was the net exports, which declined by 4.8% in volume, leading to a -2.6-p.p. contribution to the GDP. This came due to lower export of goods and services, while the import of goods and services grew.
Overall, the Romanian GDP is growing a little slower than expected in Q1, in line with other EU member states. Of course, the country is affected more by higher inflation rates due to the usage of its currency as opposed to the Euro, which for sure contributed to slower growth rates. However, consumption remains strong (and the primary driver of GDP growth), and as inflation is expected to become less and less impactful in the coming quarters/years, faster GDP growth could be expected to occur.