June 22 (Bloomberg) -- Bank of Cyprus Ltd. made a 3.78 billion-euro ($4.8 billion) offer for Emporiki Bank of Greece SA, topping a bid from Credit Agricole SA for control of Greece's sixth-biggest lender.
Bank of Cyprus, which dominates financial services on the Mediterranean island, is bidding about 28.55 euros in cash and stock for Emporiki, 21 percent more than Credit Agricole's cash offer. Together, Bank of Cyprus and Emporiki would have 12 percent of total deposits in Greece, making it the country's third-biggest lender, the Nicosia-based bank said in a statement today.
The Greek government, which owns about 20 percent of Emporiki, last week said it would consider offers for the Athens- based bank after Credit Agricole made its 3.1 billion-euro bid. Bank of Cyprus would be paying a price equal to its own market value to get about 2 million customers in a country where lending is growing almost twice as fast as in western Europe.
Bank of Cyprus's combined cash and stock offer may be ``less attractive'' to the Greek government, HSBC Pantelakis SA, a Greek brokerage, said in a note to investors. ``The Greek state has repeatedly stated its preference for a cash bid,'' HSBC said.
Credit Agricole, France's largest bank by assets, last week bid 23.50 euros in cash for each Emporiki share. Alain Berry, a spokesman for Credit Agricole, declined to comment today on the Bank of Cyprus bid. An Emporiki spokesman also declined to comment.
Branches and Jobs
Shares of Bank of Cyprus in Athens gained as much as 38 cents, or 5.5 percent, to 7.32 euros, and traded at 7.16 euros at 4:32 p.m. local time. Emporiki's stock gained 44 cents, or 1.6 percent, to 27.64 euros, valuing the bank at 3.7 billion euros. Shares of Emporiki have advanced 18 percent since Credit Agricole, which already owns 8.9 percent of the bank, made its offer on June 13.
Bank of Cyprus offered 3.25 shares and 6 euros in cash for each Emporiki share, the Cypriot bank said. It will seek investor approval next month to issue new shares for the deal, which depends upon receiving control of at least 40 percent of Emporiki.
The ``attractive'' offer for Emporiki investors provides an opportunity to create ``a leading Hellenic banking group,'' Bank of Cyprus Chairman Vassilis G. Rologis said in the statement.
Bank of Cyprus will more than triple the number of branches in Greece by buying Emporiki, which controls about 11 percent of the country's banking market. It would be a record overseas investment by a company based in Cyprus, an island nation of 800,000 people.
``Emporiki is a good target because you immediately achieve critical mass in an attractive market,'' said Panagiotis Antonopoulos, who helps oversee the equivalent of $5 billion at Athens-based Alpha Asset Management SA, and holds shares of both banks. ``There's still growth in Greece; even if it's slowing, it's still double Europe's.''
State Sales
Greece has been the fastest-growing market for Bank of Cyprus, which had 3.9 percent of the country's banking market at the end of November. Net income at Bank of Cyprus more than doubled to 37 million Cypriot pounds ($80.9 million) in the first quarter, from 16 million pounds, on lending gains and cost controls.
The bank doesn't plan job cuts in Greece after buying Emporiki and will seek to improve efficiency through ``enhanced sales,'' Yannis Kypri, general manager, said on a conference call. It may offer a voluntary retirement plan, he added.
Bank of Cyprus, which cut its cost income ratio from 74.8 percent to 58 percent over two years, will seek to make similar improvements at the Greek lender. Emporiki has a cost income ratio of 71 percent, compared with a median of 51 percent for the biggest four Greek banks, according to estimates from Credit Agricole.
State Control
The restructuring carried out by Bank of Cyprus's management and its ``long standing experience'' in Greece ``could be key in accelerating the turnaround of Emporiki's franchise,'' said Dimitris Spanodimos, analyst at UBS AG, in a research note.
Emporiki's high cost ratio is a legacy of its history under control of the government, which offered higher pension benefits than non-state banks. Pension liabilities forced Emporiki to reduce shareholders equity by 712 million euros last year. Costs will also be cut as a new law lets Emporiki dissolve worker-run pension funds and merge them into Greece's state-run fund.
Chief Executive Officer George Provopoulos, appointed in March 2004, has also reduced Emporiki's workforce by about 10 percent and merged, sold or shut down about 15 units to catch up with bigger Greek rivals like National Bank of Greece and Alpha Bank.
Emporiki attracted the bids after the government resolved its pension deficit, paving the way for Credit Agricole to boost its stake. The Greek government, advised by Citigroup Inc., is seeking to pare debt, the highest last year as a percentage of gross domestic product in the 25-nation European Union.
Credit Suisse advised Bank of Cyprus on its offer.
To contact the reporters on this story:
Maria Petrakis in Athens at mpetrakis@bloomberg.net