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. Last Updated: 07/27/2016

Vilniaus Offers $57.8M for Hermis

VILNIUS, Lithuania -- Lithuania's Vilniaus Bank made a cash offer Tuesday to buy rival Hermis Bank for 231.3 million litas ($57.8 million) in a deal that would create the country's biggest financial group.

In a joint statement, the banks said Vilniaus Bank would launch an offer to purchase Hermis Bank's outstanding shares at 128.50 litas ($32.20) per ordinary share, just above Monday's closing price of 121.03 litas on the Vilnius bourse.

The banks said the merger "will result in the establishment of a financial institution, which given its size and capacity will be able to compete with the largest Baltic banks."

The takeover, Lithuania's largest, will create the country's largest commercial bank with assets of $1.2 billion and an almost 40 percent market share. It will leap ahead of the state-owned Savings Bank, with assets of $800 million.

"This should also lead to a more efficient use of funds [and the] allocation of larger resources for [the] creation of new banking products. ... The merger undoubtedly strengthens the Lithuanian banking system, which benefits the Lithuanian economy," the banks said.

Vilniaus said it was also offering to buy a 14 percent stake in non-voting preferred shares held by the European Bank for Reconstruction and Development. It is offering 1,285 litas for these Hermis shares, which have a 500 litas par value instead of the 50 litas for ordinary ones.

"Shareholder meetings of both banks will be called during the course of the official tender in order to consider the merger of Hermis Bank and Vilniaus Bank and to approve the swap ratio of Hermis shares into Vilniaus," the statement said.

"They have a clear objective to be the dominant bank, the premium that they are paying for Hermis Bank will get paid back," said bank analyst Sylvestras Tamutis with Suprema.

The merger was approved Friday by Lithuania's competition authority and earlier by the central bank.

In the Baltic states, the combined group will be second to Estonia's Hansapank, which has $1.5 billion in assets.

Sweden's SEB, which owns 41.5 percent of Vilniaus Bank plus over half of Latvia's Unibanka and almost half of Estonia's Uhispank, has strongly backed the merger.