Erste Group


Erste Group Looks To Squeeze Out Ceska Sporitelna’s Minority Owners

Prague, Aug 30 (CTK) – Austria’s Erste Group wants to squeeze out minority shareholders of Czech bank Ceska sporitelna (CS), CS said on its website, and server wrote today that Erste offers Kc1,328 per share.


The Austrian financial group, which controls 98.97 percent of CS, asked the bank to call a general meeting to deal with the stock transfer to Erste.


Czech municipalities hold 0.59 percent of CS shares, the rest being in the hands of other individual and institutional shareholders.


It is quite surprising that Erste did not take such step much earlier as minority shareholders hold just an insignificant portion of CS shares, Fio banka analyst David Brzek told CTK.


The squeeze-out will put an end to trading in the stock on the free market of the off-exchange RM-System, which is the last market where Ceska sporitelna is traded. Minority shareholders own 0.44 percent and self-rule authorities 0.59 percent of shares with no voting rights, said Brzek.


Erste wants to own 100 percent of CS because it is seeking reduction of costs stemming from a fragmented ownership structure, said BH Securities analyst Stepan Krecek. There is just a small number of minority shareholders that are often municipalities or people buying companies’ shares within voucher privatisation and their heirs who do not even realise what they actually own, said Krecek.


There are tens of CS stock trades a day, according to him.


Krecek pointed out that Erste Group bought CS for Kc19bn in 2000, which was Kc240 per share.


CS shares last traded on RM-System for Kc1,520 per unit, said Fio banka analyst Michal Krikava. Given the low liquidity, the information does not say much about the stock’s value, he added.


The price offered by Erste estimates the value of CS at Kc202bn. Its net profit is projected at least at Kc16.5bn this year. Erste’s bid is thus 12 times the CS net profit, which is more or less consistent with the average valuation multiples of publicly traded banks in the region of Central and Eastern Europe, said Krikava. According to him, the price is adequate.


Erste Group’s squeeze-out plan will not have a significant impact on the performance of Erste and CS, and Czech municipalities that still hold CS shares, said Cyrrus analyst Lukas Kovanda.


Erste offered Kc177 per priority share 16 years ago, the current price being 7.5 times higher, said the server.


CS is the largest bank on the Czech market in terms of client numbers. It had 4.64 million clients at the end of June.


Its net profit posted an annual rise of 2.6 percent to Kc7.9bn in H1 this year.


Erste Bank, the parent company, is a key player on the banking market in Central and Eastern Europe.


Unlike CS shares, Erste has been listed on the Prague Stock Exchange.