The Slovenian Sovereign Holding (SSH) confirmed the sale of Slovenia's second-largest bank, NKBM, to US buyout fund Apollo Global Management and the European Bank for Reconstruction and Development (EBRD) on Tuesday. A sales contract with which Apollo will get 80% and EBRD 20% of the bank for a combined EUR 250m has already been signed.
"The best bidders offering the highest price have been selected," SHH management board member Matej Runjak said in announcing a deal at a press conference in Ljubljana on Tuesday.
The contract had been confirmed by the SSH management board earlier in the day in the last step of the privatisation process for the Maribor-based bank launched in early 2014.
Runjak said the the buyers were selected to provide ownership stability to the bank which was nationalised in 2013 as part of a massive bailout and only last year returned to profit. "We believe that Apollo, as a leading investment fund, has the capacity to complete the transformation of the bank."
The conclusion of the sale comes after months of negotiations which focused heavily on the price offered and guarantees for risks associated with the nationalisation which erased shareholders and junior bondholders, an issue pending review by the Constitutional Court in Slovenia.
To seal the deal, the state pledged to provide around EUR 60m in guarantees to the buyer for potential damages to the former holders of the bank's subordinate debt and equity.
State guarantees will also be provided for potential tax liabilities stemming from an ongoing review of write-downs and bad loans by the Financial Administration, where the risk will be split between the seller and buyers, and the outcome of the sale and liquidation of subsidiaries.
Runjak said that following approval from the relevant regulators in the countries where the bank operates, the state will receive the full proceeds of the sale of EUR 250m. This is expected in a few months.
In Slovenia the transactions must be approved by the central bank, Banka Slovenije, and the Securities Market Agency.
SSH chairman Matej Pirc said that the sale is expected to bring benefits to the bank, its clients and the region in which the bank operates.
This was echoed by senior partner at Apollo Global Management Gernot Lohr, who said that the fund "can bring stable ownership and ultimately achieve strong results for all stakeholders".
The international fund managed by Leon Black has a long record of investments in financial services and Lohr said it would inject the required know-how to complete the restructuring at NKBM.
The priorities are overcoming the lingering problems from toxic investments and limitations placed on the bank by the European Commission as part of the bailout.
While many of the limitations are still in place, including on acquisitions, Apollo has managed to secure a lift on ban on lending to larger parties in talks with the Commission that accompanied the acquisition negotiations, Lohr announced.
"We envision NKBM becoming a regional model of excellence and strong corporate governance," he said, adding that the focus will be on providing "ultimate transparency".
The NKBM, which has a headcount of 1,100, was selected for its "important market share" and Slovenia's "position in central Europe". "We are happy to invest in Slovenia," said the representative of one of the biggest private equity funds, which manages around US$ 163bn in assets.
Lohr added that the investment in the Slovenian bank was a long-term venture for Apollo which would last no less than five years and could run up to ten if needed. "Five years is the minimum time needed to restructure and build value."
The deal was hailed by NKBM chairman Robert Senica, who said it was the last piece in the puzzle of the transformation of Slovenia's largest bank following the crisis.
The minority buyer, EBRD, which joined the talks midstream, said its decision was guided by its commitment "to supporting the Slovenian banking sector".
"This privatisation is an important event, being the first of a bank after the crisis," said EBRD representative Aparna Rao.
The EBRD was previously present in Slovenia through investments held until 2008, including in the country's largest bank NLB.
After a six-year hiatus it returned to the country last year and recently announced it was also examining the possibility for participating in the privatisation of telecoms incumbent Telekom Slovenije together with the sole binding bidder Cinven.
NKBM is the fifth company from the list of 15 for privatisation passed by the Slovenian parliament in 2013 to be sold and the biggest so far.
Source: The Slovenia Times
