Sampo Finance, a Finnish insurance company, has made an offer to the Bank of Estonia to buy its shares in Optiva Pank, the third largest bank in Estonia. The offer concerns a 57.9 percent stake which the central bank acquired in October1998 to stabilize the banking sector and prevent a possible systemic crisis.
The central bank has agreed in principle with the terms of the offer to be made public about June 30 after the boards have approved the transaction and Sampo Finance has carried out a due diligence inspection.
Next, Sampo Finance intends to make a follow-up offer to Optiva Pank’s minority shareholders and Uhispank, which has offered to sell its 18.8 percent share in Optiva Pank. Sampo Finance will make a take-over bid to all minority shareholders at the same price as the shares held by Uhispank, which according to some specialists, may be as high as Optiva’s share price on the Tallinn Stock Exchange and better than the price offered to the Bank of Estonia.
The closing price of Optiva’s share on the Tallinn Stock Exchange on April 28 was 7.80 kroons. According to the current price at the exchange, the value of central bank’s stake in Optiva is 186 million kroons ($11 million). The Bank of Estonia purchased the stake for 225 million kroons one and a half years ago.
The Bank of Estonia is also providing a temporary conditional guarantee in the amount of 70 million kroons to support the value of specific loans held by Optiva Pank.
“Losses and gains of both parties are not clear as the terms of the transactions have not been set up,” said Kaja Kell, Bank of Estonia spokesman.
Paavo Pold, senior analyst from Suprema said the Bank of Estonia might lose a minimum of 110 million kroons in the transaction, because it had valued the stake in Optiva Pank to be worth 115 million kroons.
“That is 6.09 kroons per share. We predict the price of the share (for the Bank of Estonia) to be between 5 kroons – 6 kroons,” said Pold. “The Bank of Estonia knows best what the real value of Optiva Pank is. We think the Bank of Estonia will not have to use any of the guarantees that it provides.”
Optiva Pank, which has so far mostly concentrated on corporate client services, holds about 7 percent of the market share. Seven banks operate in Estonia.
Sampo Finance, owned in equal parts by Sampo Insurance Company and Kaleva Mutual Insurance Company, is a market leader on the Estonian insurance market since the purchase of Eesti Kindlustus, a subsidiary of Eesti Hoiupank.
After a recent merger with Finnish Leonia Bank, Sampo group became one of the biggest insurance and banking services providers in Finland.
The central bank announced that they were optimistic about the entrance of a new startegic investor and that Optiva Pank, using its owner’s international know how, would soon strengthen competition in the Estonian banking sector.