The Czech Cabinet yesterday approved the choice of Societe Generale as the KB tender winner. SG's bid for the 60% stake in KB was CZK 40.2 bil. (USD 1.02 bil.), or 1,754 CZK per share (2001E PBV of 2.95x). Cabinet said that no further government guarantees were provided (on top of the CZK 20 bil. guarantee approved by the Cabinet in December 2000). Nevertheless, the Prague MFDnes daily reports that the Cabinet prescribed the state-owned Konsolidacni banka to sign an amendment to the government’s guarantee agreement from December 2000, which would specify “certain” parts of the agreement. No further details were released.
The Finance Ministry reportedly said that the final sale price might differ from the agreed CZK 40.2 bil. bid if, after an additional audit (at the date of the real change in ownership), the bank’s book value differs from the reference book value of CZK 23 bil. by more than 20%. The purchase agreement is expected to be signed in two months.
Societe Generale said that it seeks a cost/income ratio of 50–55% and an ROE of more than 30% in the medium term for KB.
In response to the sale to Societe Generale, Moody’s upgraded its long-term international rating of Komercni banka from Baa2 to Baa1.
Following KB’s unexpected share-price weakness yesterday, we believe that there is a reasonable upside potential for KB stock over a 6–12 months' horizon. Our target price range of CZK 1,178–1,214 per share implies some 12–16% growth potential over the next 6–12 months from yesterday’s closing price of CZK 1,049.
(Jan Hájek)