Spain's Banco Santander SA and Belgium's KBC Groep NV unveiled an agreement Tuesday, Feb. 28, to merge their listed Polish banking operations to create a strengthened third-ranked lender worth about €5 billion ($6.7 billion).
The new Warsaw Stock Exchange-listed lender will be initially 76.5%-owned by Santander, with KBC owning 16.4% and the rest in freefloat. KBC plans immediately after closing to cut its stake to 10%, with Santander promising to buy up to a 5% holding from KBC. The Belgian institution plans eventually divest its remaining holding.
The agreement is based on an exchange ratio of 6.96 shares of Santander's Bank Zachodni WBK SA for every 100 shares of KBC's Kredyt Bank. At current market prices, the deal values Zachodni at 226.4 zloty ($72.68) a share and Kredyt Bank at Zl15.75 a share, the banks said.
Through the acquisition, Santander - the largest bank in the 17-nation euro-zone - would preside over a lender with almost 900 branches serving more than 3.5 million customers.
Santander last year spent Zl16.6 billion buying Zachodni, formed from the 2001 merger of Bank Zachodni and Wielkopolski Bank Kredytowy. Zachodni's previous majority shareholder was Allied Irish Banks plc.
Madrid-based Santander is looking to diversify in Poland as Spain's property crash erodes domestic earnings.
"The transaction also underlines the flexibility and other advantages of Banco Santander's model of standalone subsidiaries," Santander CEO Emilio Botin said in a statement. "From the outset, we will generate value for the shareholders of Banco Santander as well as those of the merged bank, and will create a more powerful institution for customers and employees in Poland."
Zachodni, which already ranks among Poland's three top banks, had total assets of €13.6 billion ($18.3 billion) at the end of 2011 and employs 9,383 people, while Kredyt Bank has assets of €9.4 billion and a 5,000-strong workforce.
For KBC, the Polish divestment represents another major step in a restructuring plan agreed with the European Commission in November 2009 and toward repaying state aid it received, with an estimated €4.67 billion still owed by the end of next year. KBC agreed last month to sell its Polish insurance business Towarzystwo Ubezpieczen i Reasekuracji Warta SA to
Germany's Talanx SA for €770 million.
Under the terms of the deal, due to close in the second half of 2012, Santander has also agreed to buy 100% of Zagiel, KBC's consumer finance arm in Poland.
KBC said it will continue operating on the "attractive" Polish market through its KBC Securities brokerage subsidiary and its KBC TFI asset management unit.
The transaction is subject to an independent evaluation by Zachodni and Kredyt Bank, as well as Polish Financial Supervision Authority approval and competition clearance.