Sberbank seals Denizbank deal for up to $3.9 billion

ISTANBUL

Denizbank, the sixth-largest private sector bank, has 589 branches across Turkey. REUTERS photo

Russia’s Sberbank clinched the purchase of Turkey’s Denizbank on June 8 for up to 3.09 billion euros ($3.9 billion), expanding its footprint in emerging Europe and diversifying it away from a home market that it already dominates.

The announced value of the deal is 2.8 billion euros, but Denizbank said the final price would be based on prevailing exchange rates, meaning that it is expected to reach 7.09 billion Turkish Liras, or 3.09 billion euros. That price equates to 1.45 times the book value.

“It is a very reasonable price,” said banking analyst Leonid Slipchenko at UralSib in Moscow. “If we look at the Turkish economy, the banking system is more sustainable compared to other European banking systems.”

Dexia acquired Denizbank for 3.9 times its book value in 2006. Speaking at the acquisition deal signing ceremony in Istanbul, Dexia Chief Executive Pierre Mariani said that if the deal is closed this year at current exchange rates, Dexia would register a loss of 700 million euros. The deal should close by the end of 2012, DenizBank said.

Russia’s largest bank said the long-coveted purchase, which ranks as its largest ever, would help it achieve its goal of boosting foreign earnings to 5 percent of the group total by 2014.

Fast-growing Denizbank is a unit of eurozone debt casualty Dexia, which was forced to divest businesses after its state rescue last October by Belgium, France and Luxembourg. Dexia is left needing to find a buyer for its asset management arm to complete its conversion from lender to “bad bank” holding company.

Bigger than Turkish banking

“[Sberbank’s] total net profit is higher than that of the Turkish banking industry combined. It has 70 million customers and 20,000 branches,” Denizbank Chief Executive Hakan Ateş said at the event, adding that Sberbank made the highest bid.

Semi-public Sberbank and Dexia launched exclusive talks on the deal two weeks ago after Dexia said an offer by the Qatar National Bank for Denizbank was too low.

Explaining the rationale for the deal, Sberbank Chief Executive Officer German Gref highlighted Turkey’s strong economic ties with Russia and its growth prospects.

“We want to make Denizbank an innovation center of Central and Eastern Europe. We will use [the know-how] in Russia,” Gref said.

“Turkey is a very interesting market,” he told a news conference in Istanbul. “We believe in this country.”

Some analysts believe Sberbank should, however, focus on developing its high-margin core business in Russia, a market of over 140 million that is under-banked in comparison with elsewhere in Europe.

“We are not keen on this transaction: It would have a materially negative impact on Sberbank’s capital position, a limited positive impact on Sberbank’s earnings, and distract management from restructuring the Russian business,” Simon Nellis, an analyst at Citi, said in a research note.

The acquisition will push Sberbank deeper into emerging Europe after its 505 million-euro purchase of regional player VBI from Austrian lender Volksbanken AG, agreed in February. Sberbank will buy 99.85 percent of Denizbank and will make a tender offer to buy out minority investors.

Denizbank, Turkey’s sixth-largest private sector bank, has 589 branches across Turkey, a further branch in Bahrain, a Vienna-based subsidiary called Denizbank AG and a Moscow-based unit for clients doing business in Russia.

Compiled from Reuters, AP, Anatolia News Agency and daily Hürriyet stories by the Daily News staff.