October 8, 2018 / 7:46 AM / 10 months ago

UPDATE 2-Moneta gains scale to take on foreign rivals in Czech banking deal

* Moneta Money Bank to buy Air Bank, other assets in $883 mln deal

* Tie-up will create 3rd largest Czech retail bank by network

* Gives Moneta more scale to compete against top Czech banks (Adds analyst comment, market details)

By Jason Hovet

PRAGUE, Oct 8 (Reuters) - Czech lender Moneta Money Bank announced plans on Monday to acquire domestic peer Air Bank and other assets in one of the largest deals in the Czech banking sector in recent years.

The planned 19.8 billion crown ($883 million) deal will see Moneta buy Air Bank, which is owned by Home Credit Group - part of tycoon Petr Kellner’s PPF financial empire. Moneta will also buy Home Credit’s other Czech and Slovak consumer fiance businesses as part of the agreement, to create the third largest Czech retail bank by branch network.

The tie-up will give Moneta more scale to compete with the three biggest Czech banks by assets: KBC’s CSOB bank, Erste Group’s Ceska Sporitelna and Societe Generale’s Komercni Banka. Moneta will be rebranded as Air Bank.

Air Bank was established by PPF in 2011 as a new entrant to the retail banking market and is a smaller player, while Home Credit focuses on consumer finance.

“Challenger banks have taken more than a million customers in the last 10 years out of the large banks,” Moneta Chief Executive Tomas Spurny said. “Instead of fighting a competitive pricing war we want to join our capabilities.”

Home Credit Group - controlled by Kellner, the richest person in the Czech Republic - will take a 24.48 percent stake in the expanded Moneta group, becoming its biggest shareholder.

“It is too early to assess the benefit of the transaction for existing shareholders but we consider it positive that the bank will have a major shareholder and that it will be able to compete to a bigger extent with the largest banks on the Czech market,” J&T Bank said in a research note.

The deal values new shares to be issued at 78.5 crowns per share, a discount to Moneta’s current share price, which was down 1 percent on Monday at 81.15 crowns.

Moneta, the country’s sixth largest bank by assets, was once part of General Electric’s financial wing before being listed by the U.S. conglomerate in Prague in 2016.

Home Credit Group is active in consumer lending around the globe, including in China and Russia, its biggest markets. It is 88.6 percent owned by Kellner’s PPF, and Emma Capital, controlled by Kellner associate Jiri Smejc, owns 11.4 percent.

PPF will then effectively own 21.7 percent of the combined entity once the deal closes. Emma will have 2.8 percent and Moneta’s existing shareholders 75.5 percent.

Under the terms, Home Credit will subscribe 165.6 million new Moneta shares. Moneta will also pay Home Credit 6.75 billion crowns in cash.

Moneta said it expected the deal to increase the group’s dividend per share by at least 10 percent in the first full year after the deal closes, which is expected by mid-2019.

Its 2018 dividend payment - which it forecasts at 5.50 crowns per share - would not be affected by the deal and Home Credit will not be entitled to a payment. The 2019 payout will be lower - forecast by Moneta at 3.4 crowns per share - due to restructuring costs from the deal, Spurny said in a telephone interview.

He said the 2020 dividend was forecast at 5.7 crowns a share as the company seeks to maintain its policy of paying out 70 percent of profit.

The deal should bring cost savings of around 1 billion crowns a year in the medium term while adding 5 billion crowns to operating income by 2020.

$1 = 22.3680 Czech crowns Reporting by Jason Hovet and Michael Kahn; Editing by Jason Neely and Susan Fenton

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