The price represents over four times the net asset value of Prime Bank, as of the end of September 2006, and values 100% of the bank at about $243.66 million. On a per share basis, the price of PkR54 is about 2% higher than the most recent traded price and a 42% premium to the average share price over the last 12 months.
Prime Bank was established in Lahore in 1992 and is now PakistanÆs 19th largest bank with a network of 69 branches. Together with ABNÆs own Pakistan network of 12 branches, the combined entity will be the second largest foreign bank in Pakistan with assets of PkR124 billion and 81 branches. The acquisition is a good fit for ABN AMROÆs mid-market strategy as it adds a loan portfolio primarily to small and medium enterprises (SMEs). An ABN spokesperson said details of the integration of the management and staff were being worked out.
Jeroen Drost, CEO of ABN AMRO Asia, says: ôPakistan has one of the worldÆs fastest growing financial markets and is a key growth market for ABN AMRO in Asia.ö Drost is echoing the sentiments of a number of foreign banks and strategic investors. A successful economic reform programme driven by Shaukat Aziz, a Citibanker turned Pakistani prime minister, has attracted a lot of favourable interest in the country and its banking sector.
ABN AMROÆs move follows a similar step taken by Standard Chartered. In August 2006, Standard Chartered acquired Union Bank at a value of $510.5 million, in a deal which catapulted the bank to sixth largest in the country by market share. The price represented a multiple of 17.1 times Union BankÆs reported after tax 2005 earnings and 5.6 times its most recently declared, first quarter 2006, net asset value.
Barclays and HSBC are other foreign banks speculated to be scouting for opportunities in Pakistan.
In February, UK hedge fund TCI Fund Management, in a letter leaked to media, said ABN should explore options to merge, sell or spin off some of its assets or potentially the whole business to create shareholder value. TCI owns more than 1% of ABN AMRO and proposed that its suggestion should be tabled at ABN AMRO's forthcoming shareholder meeting on April 26, a suggestion the bank declined.
ABN AMRO did not have an advisor on the acquisition. It will be advised by local firm, Global Securities, on the tender offer.
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