Reuters: Mergers News: UPDATE 3-Russia's Sberbank looks abroad with Denizbank buy

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UPDATE 3-Russia's Sberbank looks abroad with Denizbank buy Jun 8th 2012, 13:32 Fri Jun 8, 2012 9:32am EDT * Deal price is 2.8 billion euros ($3.5 billion * Final price expected to reach 3.09 billion euros * Sberbank beat out Qatar National Bank in auction * Gref says expects 5 pct of profits to come from abroad By Seltem Iyigun and Katya Golubkova ISTANBUL/MOSCOW, June 8 (Reuters) - Russia's Sberbank clinched the purchase of Turkey's DenizBank for up to 3.09 billion euros ($3.9 billion) as the former Soviet savings bank seeks to grow in emerging Europe and diversify out of a home market it already dominates. The long-coveted purchase on Friday ranks as Sberbank's largest ever, and will help CEO German Gref achieve his goal of boosting foreign earnings for the Russian lender. Gref has taken Sberbank on an overseas acquisition drive while giving its domestic operations a wake-up call, cutting long lines at branches and hour-long customer wait times at call centres. Sberbank's advance into Russia's historic sphere of influence comes as over-extended European lenders felled by the continent's sovereign debt crisis have been forced to pull back to their core markets. Explaining the rationale for the deal, Gref highlighted Turkey's strong economic ties with Russia and its growth prospects. "Turkey is a very interesting market," he told reporters in Istanbul. "We believe in this country." Fast-growing Denizbank is a unit of Dexia, which was forced to divest businesses after its state rescue last October by Belgium, France and Luxembourg. The company, once the world's biggest municipal lender, is set to become a portfolio of bonds and loans with guarantees from the three countries to cover its funding. Dexia still needs to spin off its asset management arm for an estimated $1 billion, with a number of potential buyers circling. [ID: nL5E8GUH81] The value of the Denizbank deal is 2.8 billion euros but Denizbank, Turkey's sixth-largest private sector bank, said the final price will be based on prevailing exchange rates and is expected to reach 7.09 billion lira, or 3.09 billion euros. Dexia said it would book a loss of, at present, 700 million euros based on the price it paid to buy DenizBank in 2006 and the decline of the Turkish lira to the euro since then. VALUE FOR MONEY Even with the mark-up, the deal represents good value for state-controlled Sberbank, said banking analyst Leonid Slipchenko at UralSib in Moscow. "It is a very reasonable price," Slipchenko said. "If we look at the Turkish economy, the banking system is more sustainable compared to other European banking systems." The announcement of the deal for DenizBank, which has 589 branches across Turkey, a branch in Bahrain, a Vienna subsidiary and a Moscow-based unit, confirmed what a source close to the deal had earlier told Reuters. Sberbank shares fell 2.9 percent to 81.02 roubles by 1320 GMT, while the European sector was down 1.2 percent. The deal will push Sberbank deeper into emerging Europe after its 505 million euro purchase of regional player VBI from Austrian lender Volksbanken AG, agreed in February. Sberbank has sought bolt-on acquisitions in Russia's backyard and has avoided larger, riskier deals. Gref wants foreign earnings to make up 5 percent of the group total by 2014. Some analysts believe Sberbank should, however, focus on developing its high-margin core business in Russia, a market of over 140 million that is under-banked in comparison with elsewhere in Europe. "We are not keen on this transaction: It would have a material negative impact on Sberbank's capital position, a limited positive impact on Sberbank's earnings, and distract management from restructuring the Russian business," said Simon Nellis, an analyst at Citi, in a research note. Gref said the deal would for the next few years end the Russian lender's acquisition spree, which has also taken in the $1 billion buy of Moscow brokerage Troika Dialog and a small Swiss bank. "We don't plan any more acquisitions," he said. The bank has signaled it would not need to raise external funding for the deal, which analysts expect would knock nearly a percentage point off its Tier 1 equity ratio of 11.8 percent - a level still viewed by investors as robust. Sberbank and Dexia had entered exclusive talks two weeks ago after the latter rejected a bid from Qatar National Bank as too low. Belgium, which is a Dexia shareholder and its largest provider of funding guarantees, had been looking to raise 1.5 times DenizBank's book value of 4.9 billion Turkish lira, or almost $4 billion. People familiar with the negotiations had previously said Sberbank was offering between $3.3 billion and $3.7 billion. The price agreed equates to 1.45 times book value, higher than Sberbank's book value of around 1.1, due to the high growth potential of the Turkish market, according to one analyst. Deutsche Bank, Rothschild and Troika Dialog advised Sberbank. Bank of America Merrill Lynch and Goldman Sachs advised Dexia. Sberbank's legal advisers were Linklaters and Taboglu while Dexia's was White & Case. Link this Share this Digg this Email Reprints

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