PTSB confirmed on Wednesday that Austrian banking group Bawag is one “of a number of parties” involved in the sales process of the State-controlled lender.
Bawag said in a separate statement that it had submitted a non-binding proposal for PTSB, which may lead to a cash offer for the business.
The Vienna-based group said that it has not yet made a decision on whether to table a firm offer, nor the price at which any such offer may be made for the 57 per cent State-owned bank.
Austrian newspaper Die Presse reported late Tuesday afternoon that Bawag is ready to bid €1.6 billion – equating to €2.94 per share – for the bank as second-round bids fall due later this month.
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The Irish Times previously reported that Bawag and private equity firms Centerbridge and Lone Star were circling the company as second-round bids are being called later this month.
While a €1.6 billion bid would represent a 5 per cent discount to PTSB’s current market value, market observers say that additional reporting of Bawag’s interest is bolstering hopes of a deal going through.
Businessman Eamon Waters’s investment vehicle Sretaw, the third-largest shareholder in PTSB, said that the mooted €1.6 billion valuation “looks materially too low” considering the bank’s financial position, earnings targets, and recent release of capital as a result of a regulatory review of the perceived riskiness of its mortgage book.
“The headline price significantly overstates the real cost to an acquirer. Taking into account surplus capital of circa €410 million and a conservative appraisal of circa €370 million of badwill that would be generated by a transaction at that level, the economic outlay would be closer to €800 million – around half the stated price,” Sretaw, which owns 7.2 per cent of the company, said in response to questions from The Irish Times.
[ Simon Harris should take the private equity money for PTSB and runOpens in new window ]
Badwill – also known as negative goodwill – is an accounting gain that is created when a company is acquired at a discount to its tangible equity value.
“While it is encouraging to see firmer reports of Bawag’s interest in PTSB, we believe the speculated offer of €2.94 would represent an extremely disappointing outcome for the bank and the Irish State if it were to come to pass,” said Denis McGoldrick, an analyst with Goodbody Stockbrokers.
Deutsche Bank analyst Robert Nobel has a €3.10 price target on the stock – 1 cent above where it closed on Wednesday – taking into account excess cash PTSB has on its balance sheet and potential synergies that could be extracted from a deal. Another bank would be able to scrape out more by cost savings and revenue gains than a private equity acquirer, according to analysts.
“Shareholders are advised that this announcement does not represent a firm intention by Bawag or any other party to make [a firm] offer,” PTSB said.
“There can be no certainty that any offers will be made, that any sale or other transaction will be concluded, nor as to the terms on which any offer or other transaction may be made.”
PTSB said that the aim of the sales process, initiated at the end of December, is to “identify a new owner that will enable PTSB to continue building on its recent strategic and financial progress, and to support the company in the next phase of its growth and strategic development”.
Bawag was previously best known in Irish financial circles for buying the remnants of Dublin-based Depfa Bank in 2021, and acquiring the company behind fledgling Irish mortgage lender MoCo three years ago.
It also recently held talks to buy nonbank lender Finance Ireland. However, The Irish Times reported last week that those discussions recently came to an end without a deal.
