The Slovenia Times

First phase of NLB privatisation completed


Under the terms of the initial public offering finalised on Friday, the state will initially sell 59.1% of the bank for just below EUR 609m, but taking into account an over-allotment option that the stake could increase to 65%.

Based on the pricing, the market capitalisation of NLB will be approximately EUR 1.03bn at the start of trading on the Ljubljana Stock Exchange and the Main Market of the London Stock Exchange on 14 November.

The final price represents 68% of the share's book value. The Slovenian Sovereign Holding (SSH) has priced the offering at EUR 51.50-66 per share, lower even that the offering price in the aborted IPO last year, which was set at EUR 55-71.

The seller is making an additional 1,18 million NLB shares available pursuant to the over-allotment option which, if exercised in full, would increase the offer size to EUR 669.5m, representing 65% of the share capital on admission.

A stabilisation mechanism, the option is said to have been made available on the demand of large international investors.

The shares are to be floated on the Ljubljana and London stock markets on 14 November.

According to the pricing notification issued on NLB's website, the biggest single institutional buyers of shares are US financial fund Brandes Investment Partners (7.6%) and the European Bank for Reconstruction and Development (6.3%).

Since information on the buyers of shares in London are not public, detailed data on the structure of foreign owners will not be available when details are to be presented on 14 November.

Unofficially, the demand considerably outstripped what SSH was willing to accept in a bid to avoid the most predatory investors while forming a buffer if anything was to go wrong.

The bulk of shares was offered to institutional investors. Retail investors were able to subscribe at least 10 shares at EUR 66 apiece. Unofficially they paid in some EUR 30m.

"We are very proud of having completed the offering of NLB's shares. Today's announcement represents a significant milestone in the privatisation process and in fulfilling our commitments to the European Commission," SSH chairman Lidia Glavina was quoted as saying in the release.

NLB chairman Blaž Brodnjak hailed the pricing as "another important milestone in the process of privatization". "We are looking forward to opportunities and challenges that the listing on the stock exchange will bring to the bank."

The government committed to sell the bank in exchange for the European Commission's approving a EUR 1.56bn state aid for the bank in late 2013.

While the state is to keep a controlling stake of 25% plus one share, it committed to sell at least 50% this year and any outstanding share of up to 75% minus one share by the end of next year.

Until the sale commitment is met in full, the bank will need to implement at least part of compensatory measures, including closing down offices in Slovenia, with 14 slated for closure in early December.

Moreover, since the stake sold this year will be less than 75% minus one share, the bank will also have to start procedures to sell NLB Vita, its insurance subsidiary.

In addition, NLB will be able to approve new loans only if it receives the minimum yield from equity instruments. NLB cannot do leasing business or make acquisitions either.

Financial analysts were not surprised by the price given the moment at which the bank is being sold and the situation on capital markets.

"Considering the manner and history of the sale, the time pressure and the current marked conditions, the price at the bottom of the offering price range is not a surprise," Luka Flere of the asset management firm KD Skladi told the STA.

Alta Invest analyst Matej Šimnic agreed that the moment for the initial public offering was not very favourable because of the uncertainty on capital markets, with the price a reflection of the "current interest in the European banking sector and investments in the region".

While the price is a boon for investors - the biggest buyer specialises in buying undervalued stock with good growth potential - it has provided ammunition for critics of the sale.

"This is not a sale, this is theft," said Left president Luka Mesec, stressing that SSH's supervisors and management boards should resign. He urged the government to "reject this shameful price", which is less than a third of what NLB was bailed out with five years ago.

Other parties shared a similar sentiment, but they also stressed that Slovenia had to sell the bank since this was a prerequisite for the state aid five years ago.

Former Prime Minister Miro Cerar said he had expected a better price but said it was "vital that Slovenia has met its commitment and ended this story".


More from Nekategorizirano