Rare good news for Greece as biggest banks merge
Alpha Bank, Greece's third largest lender, is to buy EFG Eurobank Ergasias and increase
capital by as much as €3.9bn to ride out a deepening recession and the country's sovereign debt
Alpha will offer investors at Eurobank, which is the country's second biggest lender, five new shares for each seven they hold, or 0.714 Alpha shares for each Eurobank share, according to a statement from the banks in Athens. That values the deal at about €750m, according to Bloomberg calculations based on Friday's closing prices.
After the merger, the bank plans to strengthen its finances with a €1.25bn rights offer, a €500m convertible note to be taken up by Qatari-backed Paramount Services Holding Ltd and €2.1bn of internal measures.
That will give the lender a core Tier 1 capital ratio of 14pc, even after accounting for writedowns of Greek government bonds, the companies said.
"This merger is a decisive step in the strengthening of the private sector economy at a crucial juncture in Greece's history, demonstrating the ongoing support of leading international investors," said Yannis Costopoulos, the chairman of Alpha Bank.
The combined bank will have €146bn of assets and 1,300 branches across eight countries, including a top-three position in Romania, Serbia, Bulgaria and Cyprus.
Alpha Bank rose 30pc, the daily limit, and EFG Eurobank 29pc on the Athens exchange, while competitors also surged. National Bank of Greece, the country's biggest bank, jumped as much as 30pc, and Piraeus Bank SA advanced as much as 29pc.
Greek stocks rallied, with the ASE General Index heading for its steepest gain in 20 years.
"A merger between any of the major Greek banks and a concurrent capital injection would be welcomed by the market, regulators and policy makers," said Alexander Kyrtsis, a senior banking analyst at UBS AG in London.
The announcement came after Christine Lagarde, the new IMF chief, said European banks should be forced to build up their capital to prevent the continent's debt crisis from infecting more countries.
Bolstering banks' balance sheets "is key to cutting the chains of contagion", Ms Lagarde said at the weekend in remarks at the US Federal Reserve's annual forum in Wyoming. (Bloomberg)