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ABN Amro to buy 93.4 percent stake in Prime Bank


KARACHI (updated on: March 05, 2007, 16:01 PST): Dutch bank ABN Amro agreed to buy a 93.4 percent stake in Prime Bank for 13.8 billion rupees ($227 million), the latest in a series of acquisition by foreign banks in Pakistan.

Foreign banks have been attracted to Pakistan's financial sector by reforms that have laid the platform for rapid growth and rising incomes, analysts say.

Major banking reforms pushed through by Prime Minister Shaukat Aziz, the finance minister President Pervez Musharraf poached from Citibank and then promoted to premier, have helped the economy's rehabilitation.

ABN Amro, which started a due diligence review of the mid-sized Pakistani lender in October last year, will also launch a tender offer for all remaining shares of Prime Bank, it said in a statement.

With 52 billion rupees worth of assets and 41 billion rupees in deposits, Prime Bank is Pakistan's 19th largest bank. It has a network of 69 branches in 25 Pakistani cities, ABN Amro said.

The price represents over four times the net asset value of Prime Bank, as of the end of September 2006, and values the bank at about $243.66 million.

The price of 54 rupees per share of Prime bank is about 2 percent higher than its last closing of 53.00 rupees.

Shares in Prime Bank were up 0.3 percent at 53.65 rupees at 0610 GMT in a broader market, which was down 1.36 percent

"GREAT OPPORTUNITY"

The deal will make the combined entity the second largest foreign bank in Pakistan, and one of the top 10 banks in the country with assets of 124 billion rupees, ABN Amro said.

"It is a great opportunity, and it shows our confidence in terms of the financial sector in Pakistan," Naved. A. Khan, ABN Amro's country executive in Pakistan, told Reuters.

"The strategy is very simple, grow the market, bring in more customers, and introduce new products," he said.

In September, Asia-focused Standard Chartered completed the $487 million purchase of a 95.37 percent stake in Union Bank Ltd. -- the biggest buy yet by a foreign bank in Pakistan.

Samba Financial Group, Saudi Arabia's second-largest bank by market capitalisation, said in November it would take control of 68 percent of Pakistan's Crescent Commercial Bank Ltd through the issuance of 600 million new shares valued at $98.75 million.

And in December, NIB Bank, a subsidiary of Singapore state investor Temasek Holdings, said it would buy a controlling stake in Pakistan Industrial Credit and Investment Corp.

Market sources expect the transaction to be worth about $300 million.

Banks' profits grew 32 percent in 2006 after recording a growth of 87 percent in 2005, according to analysts.




Copyright Reuters, 2007

Good news

http://www.nation.com.pk/daily/mar-2007/6/bnews1.php


ABN AMRO bank acquires controlling stake in Prime Bank

OUR STAFF REPORTER

KARACHI - ABN AMRO Bank has acquired 93.4 per cent interest in Prime Bank from shareholders for a cash consideration of Rs 13.8 billion (EURO 172 million), equivalent to Rs 54 per share. The bank is also planning to launch a tender offer for all remaining shares of Prime Bank from minority shareholders.

According to the press release issued by bank on Monday, the acquisition will add significant scale to ABN AMRO’s franchise in Pakistan, making the combined entity the second largest foreign bank and one of the top 10 banks in the country with assets of Rs 124 billion (Euro 1.547 billion) and over 80 branches. The bank is already the third largest foreign bank in Pakistan.

ABN AMRO Asia CEO Jeroen Drost said that Pakistan had one of the world’s fastest growing financial markets and was key growth market for ABN AMRO in Asia.

“This transaction presents tremendous opportunities to accelerate our activities in the Pakistan market as we bring together our global expertise and resources with Prime Bank’s local client base and extensive distribution network,” he added.

ABN AMRO Pakistan Country Executive Naved A Khan said: “The acquisition not only underscores our commitment to expanding further in Pakistan, it also enhances significantly our ability to serve a larger client base with more sophisticated product offerings and customer services.”

Prime Bank President and CEO Saeed I Chaudhry said: “We have achieved strong organic growth and market share increase in the past”, The offer price of Rs 54 per share, equivalent to a price to book ratio of 4.0x, represents a premium of 41.8% over Prime Bank’s average share price over the past 12 months.
ABN AMRO intends to finance the acquisition and tender offer through internal resources. The tender offer is expected to commence on March 09 and to close on March 30.

Prime Bank’s profile is an excellent strategic fit for ABN AMRO’s mid-market strategy. On the commercial side, over 50 per cent of Prime Bank’s current loan portfolio is placed with small-to-medium enterprises (SME’s), enabling ABN AMRO to build critical mass and diversify its risk portfolio in a high growth SME business banking market.

Activities of SME and corporate clients in Pakistan are increasing significantly in particular via trade between Pakistan and Asia.

On the consumer side, Prime Bank’s concentration of branches in the major cities enables ABN AMRO to quickly access an under penetrated fast growing mass affluent client base in Pakistan, providing an opportunity to implement a differentiated service level and multi-product offering.

Prime bank is a growing local bank that provides a full range of consumer and commercial banking services.
The bank has Rs 52 billion (EUR654 million) in assets, Rs 41 billion (EUR508 million) in deposits and is the 19the largest bank in Pakistan and has an extensive network of 69 branches in 25 major cities of Pakistan.

Prime Bank is a profitable entity and apparently doing very well in Pakistan, and ABN Amro already has a pressence in Pakistan. I don't understand the need of the take over.

Was it a hostile T/O?

i dont think it was hostile, just part of the governments policy of selling everything i guess.

Yaar Prime is a private bank.

thats true, but i havent read anywhere it was a hostile takeover unless the management of the bank decided to sell it. to be honest bro, i dont know how things work in the Pakistani corporate sector.

Where's Mir?
Need your 2 cents bud.
Jab zaroorat hoti hai, gaaeb ho ja ta hai!

Hey Shehz,

I am here buddy.

You know what, I wont be worried even if each and every Bank in Pakistan is taken over, either it is a bargain or hostile offer. (hope you get my point, you batter understand commercial finance culture)

Money would come and it is good thing, BTW 4.0x book value is not a bad deal, and remember the Prime is ranking somewhere around 19/20.

I get your point.

I'm curious as to why did this particular takeover took place, what's the real deal behind it, it's killing me.

Both ABN & Prime were already in Pakistan, the money is also already in Pakistan, shares are being trasferred. Prime doing so well suddenly relinqueshes over 93% shares doesn't make sense.
The original directors with less than 7% will only get a parking spot and sometimes a cup of coffee in board meetings, with conditions not to utter a word.

Get us the juicy stuff bro!

just a thought but maybe ABN wanted to expand and figured it could cut potential costs by just acquiring an existing bank rather than gonig up and building new branches and infrastructures.

and as mir rightly said 4 times book value seems quite good.

regards.

You batter know, we lack the corporate "mindset", thanks to economic boom and favourable policies, they guys got their investment 10's fold in prime, now it become 4X as Faz mentioned and it is too sweetened.

What I think, (if you have read today news) the guys are going have a bite in "Microfinance" as PM have announced to accelerate the process, they got more then expected and an oppertunity ahead (its my personal openion).

BTW let all Banks go in to Multinational's hand, the money is ultimately going to be invested in other sectors.

In most corporate takeovers, the company either puts itself up for sale or another company approaches shareholders with a share price offer higher than the current market value and thats a hosyile bid. In this i dont understand what happened. all i can think of is that the company offered itself up for sale.

Why though. I understand the multinantionals bring more competition and maybe a better corporate culture but its not wise to have all our banks in foreign hands. Its like keeping your wallet in US while living in Pakistan. Any unpredicted situation tomorrow could backfire at us when all our savings and investments are in others' hands. But the worst part is it is this policy of ours that we don't have any global companies of our own. These foreign banks are not coming to take over because Shaukat Aziz invited them and they feel obliged to do so.

They see enormous potential of money making in an economy where banks are posting 60% to 70% growth in revenues and where the economic boon is at the take off stage. Sure these foreign banks will bring better customer service and more products but they will take the gain with no local banks to gain from our own economic growth, if we give all our banks to multinational as you suggest.

Its these economic boom times of countries which produce home grown multinational corporations. Look at Habib Bank and National Bank today, they are giants and a proud symbol of our country all around the world. And though they may not come close to Citi or Chase but would you rather see Habib branch in a remote part of the world or ABN Amro. If you look at Citi bank's growth chart, it goes straight up from the year they started going multi national because it gave them more exposure and capital needed to fight the big guys.

Ours go the other way. Our banks were some of the most developed during 60s and 70s and now when its time for them to get back on track and become big again we hand them over to outsiders just because it brings in dollars. And then that's it. Everyone has an account in Citi or ABN Amro or Dubai Islamic or Chase or whatever foreign brand while you are living in ABC galee, XYZ muhalla.

I am not against multinationals and definitely not privatization, but I do believe that we are not thinking of our long term interests in this hype and euphoria of attracting foreign investment.