The Czech Cabinet this morning announced the sale of the state’s 60% stake in Komercni banka to Société Générale for CZK 40 bil. (USD 1.02 bil.), or 1,754 CZK per share. The second-highest bid, from UniCredito, was CZK 37.3 bil. (HypoVereinsbank bided CZK 20.3 bil.). The price is at the upper edge of market expectations and, as such, is positive news for the stock. In spite of this, KB’s share price is currently falling as the market is largely overbought and as some investors have decided to realize profit following recent share-price growth (20% in the past six months).
The Cabinet further announced that the selling price was not conditioned by any promise of additional state guarantees for KB and that the new owner is to pay the entire CZK 40 bil. in one trench upon the singing of the purchase agreement. The signing is expected in one to two months.
Société Générale is the second-largest French banking group with activities in 75 countries and total assets of EUR 456 bil. The expected benefit to Komercni banka may be suggested by, for example, Société Générale’s high return on equity (22.4% in 2000) or by its favorable credit ratings (S&P:A+, Moody’s: A1), which are better than those of the Czech Republic’s (S&P: A-, Moody’s: Baa1).
Considering the final price of CZK 1,754 per share and the assumed spread of a majority premium between 30-40%, the stock value, after deducting this premium, reaches 1250-1350 Kč. This is approximately 17-26% above the current share price of CZK 1,070. We expect the price of a Komercni banka stock to oscillate near the CZK 1,200 level in the coming few months.
| Majority premium |
30% |
35% |
40% |
| Share value |
1349 |
1299 |
1253 |
(Jan Hájek)