Bank of Cyprus Pays $576M For 80% Stake in Uniastrum

NICOSIA, Cyprus -- The Bank of Cyprus said Thursday that it had clinched a deal to buy 80 percent of Uniastrum, Russia's ninth-largest bank in terms of branch network, for $576 million as part of its strategy to expand abroad.

The bank said it expected the acquisition to be concluded in the fourth quarter of 2008, after regulatory approval from Greece and Russia.

"This is the most important step Bank of Cyprus has taken since deciding to expand into Greece in 1991," Bank of Cyprus chief executive Andreas Eliades told reporters.

"The acquisition of Uniastrum seals the implementation of our strategy as outlined in our three-year business plan," he said.

The purchase price corresponds to 3.1 times book value, including a capital increase of $50 million, which will be made upon completion of the takeover, Bank of Cyprus said.

Bank of Cyprus said the purchase would be financed through existing capital with its Tier 1 capital ratio remaining above 7.5 percent after the takeover is completed.

The acquisition is expected to increase profit from the first year of investment in 2009, and provide a 10 percent return on investment in 2010.

Uniastrum, created in 1994, will continue to operate independently of the existing Bank of Cyprus network in Russia, which started full banking operations in 2007.

The remaining 20 percent will remain in the hands of Uniastrum's two primary stakeholders with a three-year buyout option. Uniastrum's two founding shareholders, Georgy Piskov and Gagik Zakaryan, will each retain a 10 percent stake and remain as chairman and president, respectively.