16122018Headline:

Eurobank and Grivalia join forces and announce merger

A decision to merge with Grivalia makes Eurobank the strongest capitalised bank in Greece, with a capital ratio of 19 pct, ready to meet clients demands, return to growth and support economic activity in Greece and Southeastern Europe. The new group to be formed aims to achieve an NPEs ratio of 15 pct by 2015 falling to one-digit ratio by 2021.

More specifically, the exchange ratio proposed is c. 15.81 new Eurobank ordinary shares for every 1 Grivalia ordinary share, while Eurobank shareholders will retain the number of Eurobank ordinary shares they currently hold. Prior to completion of the merger, Grivalia will proceed with (i) a distribution of approx. 40.5 million euros (0.42 euro per Grivalia share) to its shareholders via a share capital reduction and (ii) a distribution of 13.7 million euros to its employees and BoD members, representing accrued bonus payments and BoD fees for 2018, deferred bonuses from previous years as well as partial vesting of the long term incentive plan.

The merger will result in a pro forma ownership split of the enlarged share capital of c. 59% owned by existing Eurobank shareholders and c. 41% by existing Grivalia shareholders. The Exchange Ratio plus the Pre-Transaction Distribution represent a premium of 9% over the share price of Grivalia, based on the closing prices as of Friday, 23 November 2018.

The Exchange Ratio is subject to (i) the Boards of Eurobank and Grivalia and (ii) Hellenic Financial Stability Fund (“HFSF”), all three entities, receiving fairness opinions from international investment banks. The date of the merger balance sheet will be 31 December 2018.

Fairfax Financial Holdings Limited (“FFH”), which currently holds 18.23% and 51.43% in Eurobank and Grivalia, respectively, will become the largest shareholder in the merged entity with a 32.93% shareholding.

Subject to the relevant legal and regulatory requirements and Eurobank’s corporate governance procedures, upon the completion of the Merger, Mr. George Chryssikos, currently non-executive director of Eurobank, will be proposed for non-executive Vice Chairman of the BoD of Eurobank and will join the Strategic Planning Committee. Mr. Nikolaos Bertsos, currently Chairman of the BoD of Grivalia, will be proposed for a non-executive member of the BoD of Eurobank.

In relation to the Merger, Mr. Fokion Karavias, CEO of Eurobank, stated: “The proposed merger with Grivalia is a landmark transaction for Eurobank. It will enable the bank to attain the highest total capital ratio in Greece and to accelerate the reduction of its nonperforming exposures (NPEs) through a large scale securitization of approximately 7.0 billion euros and other initiatives. Having largely addressed our legacy exposures, we will be able to turn our full attention to serving our clients, returning to growth and supporting economic activity in Greece and Southeastern Europe. This will allow us to target an NPE ratio of ca. 15% by the end of 2019, i.e. two years earlier than the plan submitted to SSM, paving the way for a single digit ratio by 2021. As a result, the bank will return to sustainable profitability, targeting a RoTE in excess of 10% in 2020. With the merger, besides significantly strengthening its financials, Eurobank will be able to deploy Grivalia’s best-in class real estate management skills to its real estate assets, in particular to its REOs which is critical for the management of NPEs.”

Mr. George Chryssikos, CEO of Grivalia, stated:

“The proposed transaction represents a unique opportunity for Grivalia and its shareholders. Grivalia shareholders will gain a significant stake in the New Group, which will be the undisputed leader in the Greek banking sector by profitability, capital ratios and asset quality, with a strong pre-provision income and capital generation capacity. The New Group will benefit from an unprecedented re-rating opportunity within the Greek banking system in the medium term. At the same time the transaction will enhance Grivalia’s business positioning, giving immediate access to an enlarged pool of real estate assets and addressing the structural inefficiencies introduced by recent changes in the Greek real estate taxation. Grivalia shareholders will also benefit from a substantial improvement in the liquidity of their holding. I am very excited for the prospects that lay ahead for the New Group and for our shareholders and I am committed, alongside our management team, to continue creating value.”