UniCredit continues to expand its operations in central and eastern Europe, with the acquisitive Italian banking group turning its gaze towards Ukraine in July. Bank Austria Creditanstalt (BA-CA), which is responsible for UniCredit’s commercial banking activities in central and eastern Europe, has signed an agreement to buy 95% of Ukrsotsbank (USB), Ukraine’s fourth-largest bank by assets. The deal follows June’s $1.5 billion purchase of a controlling stake in Kazakhstan’s ATF Bank and the acquisition of the European Bank for Reconstruction and Development’s 10% stake in Russia’s International Moscow Bank for $229 million.
The purchase will reinforce UniCredit’s presence in the fast-growing Ukrainian banking market, where it already has two subsidiaries – HVB Ukraine and UniCredit Bank – that focus on corporate banking. Pending regulatory approval, the $2.2 billion transaction, which values USB at a price-to-book value of around 4.1 times, should be completed by the end of the year. Credit Suisse acted as financial adviser to UniCredit, and Merrill Lynch advised vendor Interpipe.
Italian rival Intesa Sanpaolo had previously hoped to buy the bank but failed to agree a final purchase price with Interpipe owner Viktor Pinchuk, a son-in-law of former president Leonid Kuchma. Intesa offered $1.4 billion for USB in September 2006.
Following the announcement of the agreement with UniCredit, both Fitch Ratings and Standard & Poor’s placed USB’s B long-term credit rating on CreditWatch Positive, with S&P analyst Ekaterina Trofimova commenting that if the acquisition were successful the bank’s ratings could be raised by up to two notches.
Second highest
The $2.2 billion purchase is the second-highest price paid for a Ukrainian company after the $4.8 billion paid in 2005 by Arcelor Mittal for steelmaker Kryvorizhstal.
USB was established in 1990 with an initial focus on corporate and SME banking, but has since shifted its focus towards retail banking and is now looking to diversify its activities even further, by adding asset management, financial consulting and pension funds services. As of December 31 2006, USB had about €2.6 billion in assets and a network of almost 500 branches.
"With a population of nearly 50 million and still relatively low banking penetration, Ukraine is a very interesting market, well positioned to enjoy sustained strong asset growth in the medium term," says Federico Ghizzoni, BA-CA managing board member for CEE.
"Therefore, we have closely monitored the Ukrainian banking market for a while and looked at acquisition opportunities. Ukrsotsbank with its strong retail platform and our current Ukrainian operations with a focus on the corporate side perfectly fit together."
UniCredit’s planned takeover provides the latest confirmation of the attractiveness of the Ukrainian banking market, which has witnessed a rising tide of M&A activity by international banks since 2005. "The news is another positive indicator for Ukrainian banking stocks," says Andrew Keeley, banking analyst at Russian brokerage Troika Dialog. "While western banks often cite excessive price demands by sellers as holding back CIS acquisitions, there are clearly still banks that are willing to pay for banks valued at a price to book of three to four times to tap into the region’s fantastic growth potential."
Among the foreign players present in Ukraine are RZB and Erste Bank from Austria, BNP Paribas and Crédit Agricole from France, OTP Bank fron Hungary, ING from the Netherlands, PKO from Poland, SEB from Sweden and Citi from the US.