TBC Bank Group PLC TBC Bank acquires stake in Bank Republic from EBRD (7623M)

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RNS Number : 7623M

TBC Bank Group PLC

18 October 2016

October 18

TBC Bank agrees to acquire 6.36% stake in JSC Bank Republic from EBRD, for GEL 22 million (GBP7.6 million) as part of its previously announced transaction to create the largest Georgian bank by both loans and deposits

TBC Bank Group PLC ("TBC Bank") announces that, together with its subsidiary, JSC TBC Bank, it has entered into a definitive agreement with the European Bank for Reconstruction and Development ("EBRD") to acquire the remaining 6.36% stake in its Georgian subsidiary, JSC Bank Republic ("Bank Republic"), one of the leading universal banks in Georgia, for GEL 22 million. EBRD is a 12.5% shareholder in TBC Bank, and is therefore a related party of TBC Bank under Listing Rule 11.1.4. The acquisition is a smaller related party transaction under Listing Rule 11.1.10 and J.P. Morgan Cazenove have independently confirmed that it is fair and reasonable so far as the TBC Bank's shareholders are concerned.

Together with the previously announced acquisition of the 93.64% stake from Société Générale, these acquisitions will, once completed, result in the acquisition of 100% of the equity of Bank Republic (the "Transaction"). The Transaction represents a key milestone in the consolidation of the Georgian banking sector. The acquisition of Bank Republic, one of the leading banks in Georgia with a Top-5 position across most major metrics and with a focus on the consumer and mortgage lending markets, is highly complementary to TBC's existing operations and provides an opportunity for significant synergies.

Key Transaction Features

-- Acquisition of a large and financially sound institution with Bank Republic having maintained an RoAE of over 18% in each year since 2013 and exceeding 21% in 2015

-- Creation of the largest bank in Georgia by both loans and deposits, with TBC Bank's loan market share increasing by 7.3% to 35.7% and the deposit market share increasing by 5.3% to 34.5%

-- Reinforces TBC Bank's position in all operating segments with special strengths in retail banking, including among affluent customers

-- Further strengthens TBC Bank with highly qualified staff, with deep product knowledge and established customer relationships

-- Once fully achieved, pre-tax cost synergies from the acquisition have been estimated at approximately GEL 21 million, being derived primarily from marketing, consulting costs, streamlining of other administrative expenses as well as from moderate branch network optimization.

o Integration costs are expected to be approximately GEL 23 million (approximately 114% of annual pre-tax synergies)

   --              EPS accretive from 2017 

The Transaction

The valuation of EBRD stake is approximately GEL 22 million using the market value of the shares as of 14 October 2016.

The consideration is 70% payable in cash from own funds and 30% in newly issued TBC Bank shares. The consideration to be paid is determined on the same basis as the acquisition of the 93.64% stake from Société Générale. As a result of the Transaction, EBRD will become a 12.1% shareholder in TBC Bank.

The Transaction is expected to close before the end of 2016, following the satisfaction of all relevant condition precedents. The acquisition of EBRD's stake is expected to take place simultaneously with the closing of the acquisition of the rest of Bank Republic.

J.P. Morgan is acting as exclusive financial adviser, and Baker & McKenzie LLP as international legal adviser, to TBC Bank in relation to this transaction.

Vakhtang Butskhrikidze, Chief Executive Officer of TBC Bank said today

We have achieved another major milestone towards the completion of the acquisition of Bank Republic and are well on track in terms of the planned closing. It's great to have EBRD on board as well in our endeavor of creating a leading banking group in Georgia and the broader Caucasus region.

Side by side comparison of operating KPIs (December 2015)

 
                                                   TBC Bank           Bank Republic 
====================  ======================================  ===================== 
 Total # of Clients 
  (k)                                                 >1,600                    333 
 # of Branches                                           128                     41 
 # of ATMs                                               358                    159 
 # of Employees                                        4,765                    972 
====================  ======================================  ===================== 
 

Side by side comparison of key financials (December 2015)

 
 GEL million                                       TBC Bank         Bank Republic 
========================  =================================  ==================== 
 Gross assets                                         6,935                 1,661 
 Net loans                                            4,445                 1,184 
 Customer deposits                                    4,178                   729 
 Shareholders' equity                                 1,211                   257 
 Net interest income                                    412                    93 
 Total operating income                                 577                   131 
 Operating expenses                                     253                    58 
 Profit before tax                                      248                    56 
 Net Income                                             219                    49 
========================  =================================  ==================== 
 

Overview of Bank Republic

Bank Republic is the third largest bank in Georgia by total loans and fourth largest by deposits offering private and corporate customers a wide range of banking services and products. It serves 333 thousand customers through 41 branches and 159 ATMs. Bank Republic is universal bank with a focus on unsecured consumer and mortgage lending and employing c. 972 full time employees.

As at December 2015 Bank Republic had GEL 1.7 billion of gross assets, net loans of GEL 1.2 billion, customer deposits of GEL 0.7 billion and total equity of GEL 0.3 billion. The total operating income for the bank for the financial year ending December 2015 was GEL 131 million with profit before tax of GEL 56 million and net income of GEL 49 million.

The European Union Market Abuse Regulation EU 596/2014 requires TBC Bank to disclose that this announcement contains inside information, as defined in that Regulation.

If you have any questions, please contact:

Director of International Media and IR

Sean Wade

[e-mail]

For Reference:

Vakhtang Butskhrikidze, Chief Executive Officer, TBC Bank

Giorgi Shagidze, Deputy CEO, Chief Financial Officer, TBC Bank

George Tkhelidze, Deputy CEO, Chief Risk Officer, TBC Bank

Sean Wade, Director of International Media and IR, TBC Bank

Tel: [phone] I E-mail: [e-mail] I web: http://tbcbankgroup.com/

J.P. Morgan

Salma Kalisvaart / Igor Perekolski

Telephone: [phone]

About TBC Bank

TBC Bank is one of the leading universal banking groups in Georgia and provides a wide range of services across retail, corporate, SME and micro banking to over 1.7 million clients. The Group has a diversified multichannel platform that comprises 128 branches, one of the largest networks of ATMs and POS terminals in Georgia as well as internet and mobile banking. TBC Bank employs over 4,765 people.

TBC Bank holds the number one position in retail deposits, the number two position in loans (both to individuals and to legal entities) and in corporate deposits, according to NBG data, and has particular expertise in the fast-growing SME and micro sectors, where TBC Bank considers itself a market leader. TBC Bank management team has a strong track record of integrating acquired assets within the group perimeter and extracting synergies including acquisition of micro loans portfolio from ProCredit Bank in 2015, acquisition of Bank Constanta in 2014 and acquisition of SOA Kredit in 2007.

As at 30 June 2016, TBC Bank had gross assets of GEL 6.8 billion, gross loans and customer deposits of GEL 4.7 billion and GEL 4.3 billion, respectively, and total equity of GEL 1,315 million. TBC's profit was GEL 139.2 million for the six months ended 30 June 2016 and GEL 218.7 million for the year ended 31 December 2015.

IMPORTANT NOTICE

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond TBC Bank's control and all of which are based on its respective directors' current beliefs and expectations about future events. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. Any forward- looking statements reflect TBC Bank's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to TBC Bank's business, results of operations, financial position, liquidity, prospects, growth and strategies. Forward-looking statements speak only as of the date of this announcement and cannot be relied upon as a guide to future performance. Each of TBC Bank, and JSC TBC Bank and their respective affiliates expressly disclaims any obligation or undertaking to update,

review or revise any forward-looking statement contained in this announcement whether as a result of new information, future developments or otherwise, unless required to do so by applicable law or regulation.

Contact Details: If you have any questions or if you need additional information please contact [e-mail] or visit our website www.tbcbankgroup.com

This information is provided by RNS

The company news service from the London Stock Exchange

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October 18, 2016 02:00 ET (06:00 GMT)