Romanian Banca Carpatica invites Nextebank to buy shares after negotiations with US fund fail

Banca Comerciala Caraptica

Romanian lender Banca Carpatica (BCC) has sent an invitation to the local bank Nextebank to buy its shares left unsubscribed in a capital increase and private placement operation, after failed negotiations with US fund JC Flowers.

US fund JC Flowers, which is managed by a former Goldman Sachs executive, failed to reach an agreement with Greek group Piraeus to take over its local subsidiary, Piraeus Romania, in December 2015. Consequently, the fund gave up the takeover of Banca Carpatica, which had been negotiated earlier in 2015, but which was connected to the Piraeus deal. In other words, JC Flowers was only interested in Carpatica if it could also take over a larger bank and form a top 10 player in the Romanian banking system.

As the deal failed, Banca Carpatica has already started negotiations with other investors because it urgently needs capital. The bank raised some EUR 2.5 million from its existing shareholders, in November 2015, and needed another EUR 22 million, which should have come from JC Flowers through a private placement, according to the agreement between the two sides.

In the last day of 2015, the bank’s directorate received a non-binding offer from Nextebank, a smaller local bank owned by the Emerging Europe Accession Fund (EEAF), managed by private equity firm Axxess Capital.

Nextbank said it wanted to complete the due diligence procedures for BCC until January 22, this year, before deciding on investing in Carpatica. The bank also asked Carpatica not to start any negotiations with other investors by January 26.

In November 2014, Nextebank had submitted an offer for the merger by absorption with Banca Carpatica, but BCC’s shareholders refused it.

Banca Carpatica had EUR 3.37 million losses in the first half of 2015, as its net revenues went down by 40%, to EUR 13 million. The bank’s total assets were EUR 730 million, but the net loan portfolio was only EUR 225 million while the rest of its resources were invested in state bonds, real estate assets, or placed in minimum reserve accounts at the central bank. Carpatica had over EUR 630 million in deposits from customers, as of June 30, 2015.

Local businessman Ilie Carabulea holds the biggest stake in the bank, of over 40%, but his voting rights have been suspended by Romania’s National Bank (BNR) in early 2014 as he was investigated for corruption.

Banca Carpatica’s shares are trading on the Bucharest Stock Exchange (BVB). Their price has more than doubled in the last six months, as the investors have been betting on the bank’s takeover. The market capitalization currently stands at EUR 25 million (as of January 4, 2016).

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Diana Mesesan, diana@romania-insider.com