Komercní Banka has announced the purchase of a 60% stake in Modrá Pyramida (building society) from BHW and Ceska Pojistovna for EUR 144m, equating to a historic P/B of 3.7x. This brings KB's ownership of the building society to 100%, as Ceska Pojistovna has not exercised its pre-emptive right to buy 10% of Modra Pyramida from BHW, instead selling its own 10% holding to KB.
Our view:
We view this transaction as fully priced. In our opinion it should be slightly EPS accretive (+0.8% for 2007 and +1.4% for 2008). The deal presents not only potential for cost savings but also cross-selling opportunities, as banking products may be sold to MP's 1m customers. Note that we have taken a conservative approach and have not factored in any revenue synergy into our forecasts. Komercni Banka announced the acquisition in the morning on Friday and the stock was up 2.03%. Therefore, we do not expect the news to have an impact on today’s trading. We are reiterating our Buy rating with a fair value of CZK 4,281 per share.