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. Last Updated: 07/27/2016

$7.26Bln Bid for Bank Austria




MUNICH, Germany -- HypoVereinsbank AG has strengthened its position as one of Europe's top regional players with a 7.77 billion euro ($7.26 billion) friendly all-paper bid for Austria's largest bank, Bank Austria.


The supervisory board at HypoVereinsbank, Germany's second-largest bank, approved Saturday its management's proposal for a 1:1 share swap, equivalent to a premium of about 30 percent based on Bank Austria's 30-day average share price, said the German bank.


The move, also approved by Bank Austria's board, creates a regional powerhouse with a market capitalization of around 33.2 billion euros and assets of 650 billion euros.


Bank Austria already has a leading market position among foreign banks in Hungary and Poland, meaning a combined bank could be poised to capitalize on potentially lucrative opportunities in the former communist bloc countries. With the deal, HypoVereinsbank will be able to move closer to its goal of becoming the main bank for Eastern Europe.


Speaking at a news conference Monday, officials from both banks forecast pretax savings of 320 million euros ($300 million) by 2003 as a result of slashing overlapping operations.


HypoVereinsbank said its merger with Bank Austria will save the banks hundreds of millions of dollars but will cost Bank Austria roughly 2,000 of its 14,000 jobs by the end of 2001.


Combined, the banks have a base of 8 million customers, 2,000 branches, 65,000 employees and equity capital of 17 billion euros, HypoVereinsbank said.


Analysts cautiously greeted the deal, saying HypoVereinsbank chief executive Albrecht Schmidt had fortified his regional network strategy, but the price paid may come under scrutiny given Bank Austria's relatively low profitability.


Under the terms of the deal Bank Austria shareholders will eventually receive one HypoVereinsbank share for each Bank Austria share.


Dieter Hein, analyst at Credit Lyonnais, said the two banks fit well together, but he would be closely examining details of the transaction. "It doesn't look expensive to me, but you have to take a closer look at the numbers," he said.


Analysts will also scrutinize Schmidt's merger plans after the former Vereinsbank's 1998 discovery of 5 billion Deutsche marks ($2.4 billion) in overvalued assets on merger partner Hypo-Bank's books, which put their merger in jeopardy and threatened Schmidt's top seat.


HypoVereinsbank is expected to detail the synergies the deal will generate. While the two banks overlap very little in the front office, back office operations could be combined to produce some savings.


The head of Bank Austria, Gerhard Randa, will remain on the combined bank's board with responsibility for Austria and Eastern Europe. Albrecht Schmidt, current HypoVereinsbank head, will take over the chairmanship of Bank Austria.