BPI Will Be Sole Bidder For Banco Fomento Deal
May 05, 2011
To the surprise of the Lisbon market, the Portuguese government said Banco Portugues de Investimento will be the sole player in the next stage of the privatization of Banco Fomento & Exterior SA. Rejecting offers from Banco Finantia and financier Americo Amorim, the Finance Ministry gave BPI the go-ahead to begin the purchase of 65% of Banco Fomento & Exterior, the last of the country's big state-owned banking groups. BPI's bid will be revealed on the Lisbon stock exchange within the next two weeks, although details of the other two offers will remain undisclosed, the government said. Banco Fomento & Exterior, which on Thursday said its consolidated net profit for the first half of 2011 more than doubled, is Portugal's sixth largest banking group. BPI is the country's seventh largest bank. Analysts Taken Aback The government's announcement to accept BPI's offer confounds some analysts since the bank had made an initial offer for Banco Fomento & Exterior late last year. The government refused that overture in favor of a formal bidding process. ``I'm surprised that the government left it to one candidate right off,'' said Jeffcoat Morris-Abernathy, an analyst with Carnegie International Limited in Lisbon. ``But, there were rumors that if the decision were based on quality, it would go to BPI.'' The other bidders, he explained, ``may not have the financial muscle'' of BPI, but ``you have to ask what the government means by quality. Every time the government gets involved, it's not necessarily for the best.'' ``This does have to do with the quality of the offer,'' said a BPI spokesman who asked to remain anonymous. ``The decision shows that only BPI was fulfilling the requirements. It was a clear, sound and credible offer.'' Value of Deal The decision, he explained, allows BPI to begin courting the remaining 35% of Banco Fomento & Exterior stock, which remains in the hands of minority shareholders. Though unable to reveal how much BPI had bid for the bank, the spokesman said the entire purchase will be valued at more than $1 billion. The transaction, which should be completed by the end of September, will give BPI an 11% share of the Portuguese market and lift them to fourth place among the country's largest banking groups, he explained. Mr. Morris-Abernathy, the analyst in Lisbon, said that although it will take BPI some time to absorb the price of the acquisition, ``it clearly gives them an advantage'' and creates a ``brighter net work'' for the bank. Though BPI's shares rose to 2,115 escudos ($13.90), up 111 escudos or 5.5%, traders will probably react negatively toward Banco Fomento & Exterior stock, analysts said. The bank's shares, which were suspended before the Finance Ministry's announcement, are expected to fall because of uncertainty surrounding BPI's bid price. The shares were trading at 2,545 escudos, up 40 escudos. Banco Fomento & Exterior released profit figures for the first half just before the government's decision was announced. The bank said the sale of its shares in a state-controlled holding company boosted net profit to 16.2 billion escudos, compared with 6.6 billion escudos a year earlier. Without the extraordinary income, however, Banco Fomento & Exterior said consolidated income for the first half of the year fell 2.1% to 6.4 billion escudos from 6.6 billion escudos the year earlier.
