Czech investment group PPF’s proposed merger between Moneta Money Bank, the sixth-largest Czech bank in terms of assets, and eighth-ranked Air Bank, poses serious problems after proxy voting companies vote against it. deal and amid rumors that a large chunk of Moneta’s stock is now in the hands of hedge funds and other speculative investors who are waiting for a higher buyout price.
Proxy voting companies Glass Lewis and Institutional Shareholder Services have recommended that shareholders of Moneta Money Bank vote against Air Bank’s acquisition of PPF, Czech and Slovak Home Credit and Benxy. The share-based acquisition would lead to the de facto reverse takeover of Moneta by PPF, due to PPF’s existing 30 percent stake in Moneta.
Shareholders are due to vote on the deal on June 22. To be successful, half of the shareholders present must vote in favor and 75% must approve the issuance of new shares to PPF.
The merger will now be opposed by the California State Teachers ‘Retirement System which owns 0.25% of the shares, following Glass Lewis’ recommendation that the price is too high compared to its industry competitors.
“PPF strongly believes in the logic of combining on contractual terms its banking and consumer credit assets with Moneta to form the champion of retail banking in the Czech Republic and create value for all Moneta shareholders,” said said spokesperson Leos Roucek. bne IntelliNews in a statement sent by email.
PPF continued to pursue the case despite the death of its founder Petr kellner in March.
In May, the management of Moneta Money Bank signed a framework agreement acquisition agreement. Moneta is expected to acquire 100% of the shares of Air Bank Group for CZK 25.9 billion (€ 1 billion) through the issuance of new shares, giving the PPF group approximately 55.38% of Moneta, including its existing stake.
PPF argues that the combination of Internet banking Air Bank and Moneta will create a new strong banking group, ranked third in terms of customers (with 2.5 million) and second in consumer credit. He says he aims to double Moneta’s value and track a dividend payout ratio of 80% of earnings.
However, critics, such as hedge fund Petrus Advisers, claim that the deal overvalues Air Bank, with Moneta buying at 2.4 times the book value (higher than the 2.2x pound of PPF’s previous offering in 2018) and Undervalues Moneta, who at CZK41bn is valued at 1.5 times the book as part of the deal. PPF argues that the relative valuations stem from the superior profitability and growth potential of online banking.
After the merger, PPF will also be required to launch a mandatory takeover bid to acquire up to 100% of Moneta shares at a minimum price of CZK 80 per share, unless the central bank charges a different price. That price was a 19% premium over the share price when PPF launched the offering in March and a 34% premium over the average share price in the six months preceding the announcement. Petrus Advisers maintains that a fair price would be 93 CZK per share.
Petrus advisers claims to own more than 5% of Moneta Money Bank. He accuses PPF of pursuing a takeover strategy that deliberately avoids the normal restrictions on voting its own shares in a takeover and the need for an independent assessment. PPF initially attempted to buy Moneta and merge it with Air Bank in 2018. In that attempt, it launched a public offering which, for CZK 11.3 billion, gave it a 30% stake which it uses now to advance the merger.
In a presentation last month, along with pricing, Petrus raised concerns about Air Bank’s reliance on lending to the rest of the PPF group (which he said is around 50%), at about what he argues to be a mismatch with Moneta, and the “unrealistic assumptions” of CZK 1.9 billion synergies by 2026. He says the merger will expose Moneta to “declining to high” business. risk “of PPF, that Air Bank has very low risk provisions and that the deal will be very complex and cost much more than the forecast of CZK 2.2 billion. “The transaction involves four different stagnant companies … which makes a successful integration very complex and unlikely,” said Petrus.