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Lone Star will not submit new bid for Bank of Cyprus (updated)

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Private equity firm Lone Star, in a statement issued on Tuesday to the London Stock Exchange, said that it is not intending to submit a revised offer for the acquisition of the Bank of Cyprus.

It should be noted that the firm is bound by the restrictions set out in Rule 2.8 of the Irish Takeover Rules. This section, which refers to the section titled ‘Statements of Intention not to Make an Offer’, under certain conditions, allows for the statement to be set aside, in turn allowing the firm to make a new offer within the next 6 months.

As previously reported, under Irish takeover rules, Lone Star was required by no later than 17:00 (Irish time) on September 30, to either announce its intention to submit its final offer or to notify that it does not intend to do so.

The Bank of Cyprus’ board of directors has already unanimously and unequivocally rejected three unsolicited, conditional, non-binding proposals by the US private equity firm, with the last proposal offering €1.51 per share for the bank.

The private equity firm on September 6 announced that it was considering its options in terms of submitting a revised takeover bid for the Cypriot bank.

Meanwhile, the bill designed to enshrine into national law a European Union directive for the screening of foreign direct investment (FDI), which was submitted to the Cabinet of Ministers earlier this month and presented to the House finance committee on Monday, is due to be presented to the House plenary on Thursday.

According to reports, a number of slight modifications were put forward during Monday’s finance committee session, including by the Cyprus International Businesses Association (CIBA) and the Institute of Certified Public Accountants of Cyprus (Selk).

The proposals will be taken into account before the bill is submitted to the House plenary. It should be noted that the state’s Legal Service has undertaken the task of incorporating these proposals into the new version of the bill.

The bill describes the conditions under which an obligation to notify the intended foreign direct investment and obtain approval is created, along with the criteria and factors that can be taken into account during the foreign direct investment control.

It also defines the foreign direct investment control process, the type of information required during the control of the investment, as well as the executive powers of the competent authority, which, in this case, refers to the Ministry of Finance.

In essence, the bill would allow the respective Finance Minister to have a say on the approval of foreign direct investments from third countries in Cypriot companies.

The bill is directly linked with the aforementioned takeover attempts of the Bank of Cyprus by US private equity firm Lone Star.

Finance Minister Constantinos Petrides has previously said that “Cyprus must safeguard the stability of its banking sector”, describing this as being in the public interest.

“If we see that there are dangerous and aggressive takeovers from abroad, then we must have the right to decide whether they should go ahead or not,” the Finance Minister added.

Following the rejections of its official bids, earlier this month, Lone Star had dispatched a team to Cyprus to meet with high-ranking executives and politicians in order to gauge whether there were grounds for a new bid.

The private equity firm’s team had reportedly deemed that neither the economic nor the political environment of the island had any real desire for Cyprus’ largest bank to be acquired by the firm, especially during a critical time for both the Cypriot economy and the stability of its banking system.

Moreover, at the House finance committee session, in their overwhelming majority, many representatives and their respective parties stated that they were against Lone Star’s acquisition of the Bank of Cyprus.

In response to the announcement by Lone Star, the board of directors of the Bank of Cyprus on Tuesday released a statement confirming that it has not received any further approach from Lone Star following its rejection of Lone Star’s third proposal on 22 July 2022, noting that the rejected proposals fundamentally undervalued the company and its future prospects.

“The board remains confident in the company’s future prospects and remains committed to delivering its strategy of becoming a sustainably profitable institution capable of further supporting the Cypriot economy,” the Bank of Cyprus’ board of directors said.

The Bank of Cyprus has recently updated its medium-term strategic targets in February 2022 and upgraded its expectations in May and again in August 2022.

In addition, the board reiterated the upgraded guidance given in August 2022, including delivery of a return on tangible equity of greater than 10 per cent in 2023 and, subject to regulatory approvals and market conditions, a return to meaningful dividend distributions from 2023 onwards.

“The board remains confident in its ability to implement its strategic objectives, delivering strong shareholder returns in the medium and long term,” the board of directors concluded in its statement.

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