Czech investment firm PPF Group has announced that it has terminated an agreement with Moneta Money Bank (MMB) on the acquisition of PPF’s Air Bank Group, including Air Bank, Czech and Slovak Home Credit and Benxy ( Zonky), citing macroeconomic changes that had “radically altered the parameters of the originally planned merger.”
The decision, which would have been made by PPF new CEO Jiri Smejcends the pursuit of Moneta by the Czech financial group, which lasted almost four years. This is the second key decision by the new CEO – who officially takes office on June 15 – after the sale of the Russian activities of the consumer credit arm of Home Credit, announced last month.
The takeover would have created a group with a total of around 2.5 million customers in a country of 10.7 million people, placing it third in terms of customers and second in terms of credit. to consumption.
Hospodarske Noviny reported that, according to an anonymous source from financial circles, Jiri Smejc, director of the PPF financial group who will take over as CEO from June 15 considers Air Bank’s valuation to be low. “The new management of PPF was surprised. They were not satisfied with the parameters of the transaction,” the daily quoted its source as saying. The valuation of Fast growing Air Bankranked eighth in terms of bank assets, was also the reason why PPF canceled the case three years ago.
According to the agreement approved by Moneta shareholders in December 2021, Moneta, ranked sixth for banking assets, had agreed to buy Air Bank Group for CZK 25.9 billion (€1 billion) with newly issued shares. , which would have given PPF a majority in Moneta’s expanded share capital.
The planned capital increase was designed to raise approximately CZK 21 billion through a public offering of 255.5 million new shares to existing shareholders, in a two-step share subscription process. rounds. The planned capital increase has now been cancelled.
According to PPF, the new circumstances that have modified the agreed economic parameters are: the negative development of the capital markets (an increase in the countercyclical capital buffer mandated by the CNB from 0.5% to 2.5% currently); accounting regulations (known as purchase price allocation), which would have a limited impact on the execution of the transaction; as well as the deterioration of the macroeconomic and geopolitical situation, including the effects of the war in Ukraine, which increase the risks linked to the performance of the assets.
“This increase in the countercyclical capital buffer will significantly reduce the expected dividend capacity for the merged bank and will have a further negative impact on the attractiveness of the planned acquisition for all MMB shareholders,” PPF noted.
“The current economic situation and the difficulties regarding forecasting and visibility of future developments also reduce the growth potential of the merged bank,” he added.
With a 29.94% stake, the PPF Group remains MMB’s largest shareholder and will reimburse expenses of more than 100 million crowns incurred by Moneta.
“The cancellation of the transaction could be slightly negative for Moneta shares in the short term since the possibility of a mandatory tender offer at CZK90 was a certain anchor for investors. Meanwhile, at current levels, we consider the stocks undervalued and the cancellation of the transaction could bring attention back to the strong fundamentals of the bank,” said Milan Vanicek, head of research at J&T bank.
“Overall, the PPF statements make sense to me. Indeed, the countercyclical capital buffer rate is set to rise sharply, which in itself reduces the potential for dividend payments and thus makes an investment in Moneta shares less attractive,” Radim Dohnal, an analyst at Capitalinked.com, was quoted by the Czech news agency as saying.
According to him, this is good news for the Czech economy because the stock market will not lose another decent issue. “I also think that a less concentrated banking market is more of a benefit to the national economy,” he added.
In response to the canceled merger, Moneta shares fell around 5% on the Prague Stock Exchange the next morning and ended 2.28% in the red around noon.
As part of completed negotiations, Moneta management reiterated its current outlook without the impact of its acquisition of Air Bank Group. The bank expects its net profit to reach at least CZK 4.4 billion in 2022, followed by gradual growth to CZK 5 billion by 2026.
“The payout ratio is assumed at 80%, which would mean CZK 6.8 per share on earnings this year (gross div. yield 8.6%) and an increase to CZK 7.8 in 2026 (div. yield). .9.9% gross),” Vanicek noted.
“We believe the outlook for the company is sufficiently conservative and can be realized. Therefore, Moneta offers a very attractive dividend yield and upside potential,” he added.