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The boards of directors of Sparebanken Sør and Sparebanken Vest have today agreed a merger plan that will form Norway’s leading savings bank. The new financial group will become the largest savings bank in Norway with combined total assets of NOK 517 billion and gross loans of NOK 429 billion, including Brage Finans AS.
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Sparebanken Sør and Sparebanken Vest have a long and close relationship with jointly owned product companies and know each other well. This represents a strong foundation for a successful merger of two equal parties characterised by efficient operations with low complexity.
Increased size will strengthen the competitiveness to the benefit of customers, local communities, owners and employees. A larger balance sheet will represent increased capacity in the corporate segment, combined with a further strengthened competitiveness in the retail segment. Increased size will also strengthen the bank’s ability to maintain a leading position within technology and product development which, amongst others, leads to strong cost efficiency and continued leading technological solutions for the customers.
The new bank will continue and further strengthen its contribution to the Frende Group becoming the most attractive partner to independent savings banks.
- For more than 200 years, Sparebanken Sør and Sparebanken Vest have played important roles in local communities. Both banks are the result of several mergers and have through generations contributed to growth, activity, employment and financial safety for retail and corporate customers. We are now establishing the largest savings bank in Norway that, based on the savings bank philosophy, will have a strong foundation to meet future competition and developments in the financial sector. The bank becomes an offensive and strong player with leading profitability, anchored throughout Southern and Western Norway, says Jan Erik Kjerpeseth, CEO of Sparebanken Vest.
- The combination of the two banks will give us a very strong market position in Southern and Western Norway. The bank will have even greater resources when contributing to growth and development for corporates and citizens in our parts of Norway, says Geir Bergskaug, CEO of Sparebanken Sør.
Attractive employer with two head offices
Sparebanken Sør and Sparebanken Vest have over a long period of time built strong competence environments. The new bank will have two head offices located in Kristiansand and Bergen, and to maintain the position as Norway’s leading savings bank it will be key that group functions and competencies are further developed in both cities. The bank will become one of the most attractive workplaces within the financial sector in Norway with approximately 1,500 employees. The group wants all employees to continue, and there will be no redundancies as a consequence of the merger.
The new bank will have strong centres of expertise with an attractive internal labour market and interesting opportunities for development for its employees. Focus on organisational culture and leadership development will be key.
The board of directors in Sparebanken Sør has in consultation with the board of directors in Sparebanken Vest agreed that the new bank’s head office in Kristiansand will be fully renovated and modernised to become a forward-looking building for employees and customers.
The CEO of Sparebanken Vest, Jan Erik Kjerpeseth, will become CEO of the new group, and current chairperson of the board of Sparebanken Sør, Knut Ruhaven Sæthre, will be chairperson. The current CEO of Sparebanken Sør, Geir Bergskaug, will join the board.
The composition of the group management team will be decided prior to the legal merger. It will be a balanced representation from the current two banks in all central governance bodies.
The employee representatives in the respective board of directors have voted in favour of the merger. The chief union representatives of both banks have been informed of the merger negotiations and will be closely involved in the integration process.
A process to decide a new name and brand will be initiated.
Considerable benefits of scale and capital efficiency – increased profitability
The new bank will benefit from economies of scale and has identified annual cost savings of approximately NOK 350 – 400 million. The potential for cost savings is amongst others linked to IT expenses. Cost reductions related to personnel will be realised through natural turnover. The capital efficiency will improve considerably by applying Sparebanken Vest’s IRB-model on Sparebanken Sør’s portfolio. Capital synergies of net NOK 2 billion have been estimated, in addition to the estimated effect of implementation of new standard method (CRR3) for Sparebanken Sør of NOK 2.1 billion.
The new bank will have an ambition of leading profitability with a return on equity target of above 13%. Strong profitability combined with efficient capital structure will ensure continued basis for attractive dividends to equity certificate owners, customers and local societies.
- Sparebanken Vest and Sparebanken Sør are two large regional savings banks with strong positions in their respective parts of Norway. The banks have cooperated closely for many years, and both have been instrumental in building attractive product companies as Frende Holding AS, Brage Finans AS, Norne Securities AS and Balder Betaling AS. The product offering will be strengthened further through the announced acquisition of Borea Asset Management AS. Based on the respective strengths of the banks, we are confident that together we have the best capabilities to create one of Norway’s strongest financial groups within both the retail and corporate markets, says chairperson of Sparebanken Sør, Knut Ruhaven Sæthre.
Substantial donations and customer dividends
Local ownership is continued and will be central for the new bank, and the current savings banks foundations will continue to be important equity capital certificate (“ECC”) owners.
Both banks have a considerable community ownership through the primary capital and the savings bank foundations. The two banks’ primary capital will be combined as part of the merger but allocated to the respective regions through the articles of association. Hence, the values created over time will remain with the respective regions in case of any future changes to the capital structure. The new bank will have an ECC share of equity of approximately 40.4%, in line with the current ECC ratio of the two banks.
- Maintaining the current equity structure ensures continued attractive value creation and dividend to communities, ECC owners and customers. Increased profitability and dividends from synergies will benefit all stakeholders, says Arild Bødal, chairperson of Sparebanken Vest.
The merger is supported by Sparebankstiftelsen Sparebanken Sør (the foundation) which is the largest ECC owner in Sparebanken Sør.
- The merger is a future-oriented and a very good decision. It maintains the savings bank philosophy and further strengthens our effort as a long-term owner and contributor to our region, says Eskild Stenhaug, CEO of the foundation.
Continued commitment to the Frende Group and the associated companies
The new bank will maintain its commitment to the Frende Group to ensure an attractive cooperation alternative to the current savings banks alliances.
As a result of the merger, the bank will become majority owner in the Frende companies, including Frende Holding AS, Brage Finans AS, Norne Securities AS, Balder Betaling AS and Borea Asset Management AS. The bank will enter into dialogue with its partners in the Frende Group in order to establish a future structure that will secure the attractiveness of the Frende cooperation while at the same time exploiting synergies with the new bank.
Exchange ratio and merger consideration
The exchange ratio and merger consideration are agreed based on negotiations between the banks, based on financial analyses, including emphasis on reported and value adjusted equity and expected normalised profits. Financial and legal due diligence as well as analysis of the banks’ balance sheets as of 31 March 2024 have also been taken into considerations.
Recorded equity as of 30 June 2024 was NOK 15 607 million in Sparebanken Sør and NOK 21 710 million in Sparebanken Vest (excluding hybrid capital and minority interests). The banks have agreed an exchange ratio of 64.3% to Sparebanken Vest and 35.7% to Sparebanken Sør.
Currently both banks have primary and ECC capital as part of their capital structures, with an ECC ratio of 40.7% and 40.0% for Sparebanken Vest and Sparebanken Sør, respectively.
The exchange ratio and ECC ratio regulate the value allocation between the current ECC owners of Sparebanken Vest and Sparebanken Sør and the primary capital in Sparebanken Vest and Sparebanken Sør. The ECC ratio in the merged bank at completion of the merger will equal the average of the ECC ratios of the two banks, adjusted for the agreed exchange ratio, and will be 40.44%.
Sparebanken Vest currently owns ECCs in Sparebanken Sør, and Sparebanken Sør owns ECCs in Sparebanken Vest. The banks are planning to sell these prior to completion of the merger. If any of these ECCs are not divested prior to the completion of the merger, it will affect the final ECC ratio in the merged bank as it will hold own ECCs.
The merger consideration for transferring all assets, rights and liabilities from Sparebanken Sør shall be ECCs in the merged bank, which will be issued to the ECC owners of Sparebanken Sør.As part of the merger, the primary capital of Sparebanken Vest will be increased. In the event of any future changes to the capital structure leading to release of all or parts of the primary capital in the merged bank, the released primary capital will be allocated so that it is retained in the respective local communities where it has been earned.
Sparebanken Vest will, based on the agreed exchange ratio, issue a total of 59,895,314 ECCs as consideration for the ECC capital in Sparebanken Sør, implying that one ECC in Sparebanken Sør is exchanged for 1.437 ECCs in Sparebanken Vest. The subscription price per ECC will be equal to the latest estimated book value per ECC in Sparebanken Vest at company level at the time when the board of directors approve the completion of the merger.
In addition to the consideration consisting of new ECCs in the merged bank, the primary capital will be increased resulting in the ECC ratio as described above.
Governing bodies
General assembly
The current general assemblies in Sparebanken Sør and Sparebanken Vest will be combined and will after the merger consist of 80 members, of which 48 members come from Sparebanken Vest and 32 members from Sparebanken Sør, and 44 deputy members.
From and including the 2027 election, the general assembly will have 60 members and 28 deputy members.
From and including the 2028 election, the general assembly will have 48 members and 24 deputy members.
Nomination committee
The general assembly appoints a nomination committee of 9 members. From and including the 2028 election, the nomination committee will consist of 7 members.
Board of directors
The board of directors of the merged bank will consist of 13 members and 8 deputy members.
The general assembly of Sparebanken Sør will appoint the chairperson, 3 members and 2 deputy members.
The general assembly of Sparebanken Vest will appoint the deputy chairperson, 4 members and 2 deputy members.
The employees of Sparebanken Sør and Sparebanken Vest appoint 2 members and 2 deputy members from each bank.
The current chairperson of Sparebanken Sør, Knut Ruhaven Sæthre, will become chairperson of the board. The current CEO of Sparebanken Sør, Geir Bergskaug, will become member of the board.
From and including the 2028 election, the board will consist of 10 members, of which 7 members and 2 deputy members appointed by the general assembly and 3 members and 3 deputy members appointed by and among the employees.
Legal and accounting acquiring bank
Sparebanken Vest will be the legal and accounting acquiring bank, and will acquire all of Sparebanken Sør’s assets, rights and liabilities through the completion of the merger.
Timing of and conditions for the merger
The board of directors of Sparebanken Sør and Sparebanken Vest will to the general assembly in Sparebanken Sør and Sparebanken Vest, respectively, primo October 2024 propose to approve the merger plan. The completion of the merger is amongst others conditional upon approval by the respective general assemblies and that necessary regulatory approvals are without conditions or subject to conditions that will not materially change the assumptions for entering into the merger plan.
The aim is to complete the merger within the second quarter of 2025.
Presentation to media and capital market
Sparebanken Sør and Sparebanken Vest will host a joint presentation today 28 August 2024 at 10:00 CEST at Hotel Continental in Oslo, with CEOs, CFOs and chairpersons from the respective banks present. The presentation can be viewed live using the following link: https://vimeo.com/event/4533648/23343cb676
Questions can be emailed to investorrelations@spv.no or ir@sor.no prior to and during the webcast.
A recording will be made available later.
A presentation and Q&A session in English will be held 28 August 2024 at 16:00 CEST. Link: https://teams.microsoft.com/l/meetup-join/19%3Ameeting_MjY0MGM1MWUtMTI1Ni00MTA0LTkxZjEtNGM3NWM4YjNjMmE5%40thread.v2/0?context={"Tid"%3A"f8f86bd5-66c6-403b-a154-dcd450b42b33"%2C"Oid"%3A"d478dd0f-fd0f-4de2-886d-c7c0472be963"}
Advisors
Sparebanken Sør has engaged Pareto Securities AS as financial advisor and Advokatfirmaet Thommessen AS as legal advisor in relation to the merger. Sparebanken Vest has engaged Swedbank AB as financial advisor and Advokatfirmaet Selmer AS as legal advisor.
Contact persons:
Sparebanken Vest:
Chairperson: Arild Bødal, tel: +47 905 66 621
CEO: Jan Erik Kjerpeseth, tel: +47 951 98 430
CFO: Frank Johannesen, tel: +47 952 65 971
Sparebanken Sør:
Chairperson: Knut Ruhaven Sæthre, tel: +47 911 17 876
CEO: Geir Bergskaug, tel: +47 901 27 206
CFO: Steinar Vigsnes, tel: +47 906 13 135
The above information is considered to be inside information pursuant to article 7 in the Market Abuse Regulation (MAR) and is subject to the requirements of announcement pursuant to the Securities Trading Act section 5-12. This notice is published on behalf of Sparebanken Vest by Brede Borgen Kristiansen at 08:00 (CEST), 28 August 2024.
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