Bank of Cyprus ‘unequivocally’ rejects Lone Star’s takeover proposal (Updated)

Bank of Cyprus (BoC) said on Friday it had received and unanimously rejected “unequivocally” three unsolicited, conditional, non-binding proposals from Lone Star relating to a possible cash offer for the entire issued, and to be issued, share capital of the company.

The bank issued an announcement shortly after Bloomberg news agency reported that “private equity firm Lone Star which invests in real estate, equity, credit and other financial assets globally said it offered €1.50 ($1.51) per share for the bank”.

Shares in the bank which are up about 11 per cent so far this year, closed at around €1.14 euros on Thursday. Bank of Cyprus currently has a market cap of €524.3 million, according to Refinitiv, Reuters reported.

The takeover proposal was first reported by Bloomberg.

Last year, the bank agreed to sell a portfolio of non-performing loans and some real estate properties to Allianz’s Pimco for around €385 million.

According to Bloomberg, Bank of Cyprus shares rose as much as 23 per cent on Friday. The stock was up 8 per cent at 4:11 pm in London, giving it a market value of roughly £455 million, Bloomberg said.

“Dallas-based Lone Star, led by billionaire founder and chairman John Grayken, has a track record of investing in banks, and its portfolio includes Germany’s IKB Deutsche Industriebank AG and Portugal’s Novo Banco SA,” Bloomberg reported.

In its response later on Friday, BoC said the first proposal was received on May 5, 2022 at a price of €1.25 per share.

“Following careful consideration together with its financial advisers, the board unanimously rejected the ‘First Proposal’ on May 20, 2022,” BoC said.

The second proposal was received on May 25, 2022 at a price of €1.38 per share.

“Following careful consideration together with its financial advisers, the board unanimously rejected the ‘Second Proposal’ on June 3,2022,” the BoC statement said.

A further approach from Lone Star was received on June 16, 2022 seeking a meeting regarding execution considerations relating to the Second Proposal, the bank said.

The financial terms of the proposal presented in the June 16, 2022 approach were unchanged from those contained in the Second Proposal, which was unanimously rejected on June 3, it added.

“Accordingly, the Board unanimously rejected this further approach and request for engagement on June 29, 2022,” it said.

The third proposal was received on July 8, 2022 at a price of €1.51 per share.

The bank board, “having carefully considered the Third Proposal together with its financial advisers, concluded that it fundamentally undervalues the company and its future prospects and was not in the best interests of the company, its shareholders or other stakeholders”.

The board therefore rejected the Third Proposal on July 22, 2022.

The bank has not received any further approach from Lone Star since July 22 and confirms it is not currently considering any proposal from Lone Star.

“In addition to fundamentally undervaluing the company and its future prospects, the board believes that the proposal from Lone Star does not adequately address the complexities of completing a transaction to acquire Bank of Cyprus, given its strategic importance to Cyprus,” it added.

The statement said the bank’s board is confident in the company’s future prospects and remains committed to delivering its strategy of becoming a stronger, safer and a more focused institution capable of further supporting the recovery of the Cypriot economy.

Bank of Cyprus updated its medium-term strategic targets in February 2022 and upgraded its expectations in May 2022.

“The board reiterates the guidance given in May 2022, including delivery of a return on tangible equity of greater than 10 per cent in 2024 and, subject to performance and relevant approvals, a return to dividend distributions from 2023 onwards,” the statement said.

It added that the board remains confident in its ability to implement its strategic objectives, “delivering strong shareholder returns in the medium and long term, and accordingly has unequivocally rejected the proposal from Lone Star”.

“Shareholders are strongly urged to take no action at this time,” it added.

“There can be no certainty that any formal offer will be made nor as to the terms on which any offer might be made. This announcement is being made without the agreement or approval of Lone Star.”