Mergers, Acquisitions and Takeovers Case Study

Romania Rejects Acquisition Bid of CEE Banking Giants

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Abstract:
On 22 December 2006 the Romanian Government rejected the acquisition bid of Central and Eastern Europe (CEE) banking giants and decided to restructure the last major state-owned bank, Casa de Economii si Consemnatiuni (CEC). Among the seven CEE banking giants who bid for a 69.9% stake in CEC, the National Bank of Greece and the Hungarian OTP (Orszagos Takarek Penztar) bank were shortlisted by the Romanian government to move forward in the final round of the bidding. The Romanian finance ministry had valued the Romanian bank at 1 billion euros, 69.9% of which was tantamount to around 700 million euros. The Greek and the Hungarian bank had initially offered a value of 500 million euros and 450 million euros respectively, which was later improved on by the Greek bank to 560 million euros (US$738 million). The lower than expected bid coerced the Romanian authorities to think differently. The Romanian Government had finally proclaimed its decision to cancel the privatisation of its last major state-owned bank and would instead focus on restructuring for the next two years. The Romanian Government had planned to inject 150 million euros into CEC, which would henceforth turn it into a bank for low-income earners and people in rural areas. This incident would go down in the history books as a rare occasion when a bank that was put up for sale by the country's government cancelled their intention and instead adopted the path of restructuring for its self-enhancement. Romania was the latest destination of the CEE-focused Global banks to establish their presence in the country. Besides this, the country's EU (European Union) membership in 2007 was believed to set the tone for the banking sector's future developments. Analysts perceived that in such a scenario the foreign banks had lost out on a great business opportunity to establish a strong foothold in CEE. But it was highly demotivating when the Romanian Government threw cold water over the privatisation of the country's fifth-largest bank and returned the CEE banking giants empty-handed. It remains a moot point whether the Romanian Government would be able to justify its decision in the long-term and rejuvenate the bank's fortunes from an unimpressive situation to a bank of international repute. This case is intended for MBA / PGDBM students and was designed to be part of the strategic management curriculum.

Pedagogical Objectives:

• To understand the role of mergers and acquisitions in the growth strategy of banking companies.
• To analyse the benefits and drawbacks of mergers and acquisitions associated with banking companies.
• To to study the probable impact of the acquisition on the Romanian banking sector.
• To understand the probable synergies of the acquisition on the CEE banking sector.
• To understand the pros and cons of the Romanian Banking sector reforms.

Keywords : CEE (Central and Eastern Europe), Romania, CEC (Casa de Economii Si Consemnatiuni), Greek, Hungary, CAGR (compound annual growth rate), ROE (return on equity), NBR (National Bank of Romania), EU (European Union), BID (Banco Interamericano de Desarrollo), Assets, Market share, Deal, Romanian banking sector

Contents : 
The Bidders Had a Growing Presence in CEE
National Bank of Greece (NBG)
Romanian banking industry
Cynosure of the Bid
Corporate & Retail Lending Business
History of the OTP Group (1839-2005)
OTP Bank and its foreign subsidiaries
A Complete List of 37 Banks in Romania