The FINANCIAL -- Bank of Georgia the leading Georgian universal bank, announced last week that it has successfully completed the acquisition of a 98.77% equity interest in Universal Bank of Development & Partnership (“UBDP”), a mid-sized bank in Ukraine. “We look forward to servicing the Georgian diaspora in Kiev, Ukrainian visitors to Georgia and the increasing trade flows between the two countries. The Georgian corporate sector, which is growing rapidly, is seeking to deepen its presence in key export markets, with Ukraine featuring prominently in this respect,” said Lado Gurgenidze, Chairman of the Supervisory Board of Bank of Georgia.
The completion of the transaction followed the approval of the National Bank of Ukraine as announced in August 2007, allowing Bank of Georgia to increase its stake up to 100% since the acquisition of a 9.92% equity interest in UBDP in January 2007. The aggregate consideration paid for the 98.77% equity interest comprised of USD 81.7 million, which translates into a P/BV (2006A) of 2.15x, based on UBDP’s 2006 Audited IFRS financial results. Galt & Taggart Securities acted as Bank of Georgia’s sole financial advisor in connection with this transaction.
As of 30 June 2007, UBDP held market shares of approximately 0.22% by total assets, 0.25% by gross loans, 0.21% by total deposits and 0.31% by shareholders’ equity, based on the National Bank of Ukraine data. UBDP, which is headquartered in Kiev, currently serves approximately 20,000 retail and 2,500 corporate clients through its 39 branches located in five oblasts of Ukraine, of which 14 operate in Kiev. UBDP is an associate member of VISA international. The bank has a network of 31 ATMs. Selected Financial Indicators:
YE 2006 (IFRS, Audited)
1H 2007 (IFRS based, Unaudited)
30 September 2007
Corporate & SME Clients
According to Lado Gurgenidze, Chairman of the Supervisory Board of Bank of Georgia, he is delighted with the acquisition as he believe that the Ukrainian market is a second home market and with it will be opened new opportunities for developing closer relations between the two countries Georgia and Ukraine.
“In some ways, UBDP reminds us of Bank of Georgia circa October 2004, when our management team commenced its turnaround; Bank of Georgia had assets of USD 158 million back then, compared to UBDP’s USD 209 million, had just 54 branches (compared to UBDP’s 39) serving 60,875 retail clients, less than 40,000 cards in issuance and 17 ATMs. While sceptics may say that the Ukrainian market is highly competitive, let me point out that it is also very fragmented, with the top ten banks accounting for just 52% of total banking sector assets, with the rest of the sector comprising over 160 small and medium-sized banks. Those who have closely followed Bank of Georgia’s progress will agree, I believe, that we are well positioned competitively vis-à-vis our Ukrainian peer group. It is also important to note that in Ukraine we aspire to up to 1% in terms of market share, so we are entering this market with highly realistic expectations” added Gurgenidze.
Moreover Bank of Georgia is going to integrate Galt and Taggart’s platform with that of UBDP and be able to offer end-to-end services propositions to Ukrainian growth companies. Furthermore Bank of Georgia wishes to build a private banking and asset management presence in Ukraine and enhance UBDP’s management team by seconding Sulkhan Gvalia, deputy CEO and Chief Risk Officer to Kiev, to spearhead the crucial initial phases of the integration.
Gurgenidze added that he was pleased to find UBDP’s dedicated professionals who are ready to build and enhance the bank’s franchise as part of the Bank of Georgia group.
“We look forward to servicing the Georgian diaspora in Kiev, Ukrainian visitors to Georgia and the increasing trade flows between the two countries. The Georgian corporate sector, which is growing rapidly, is seeking to deepen its presence in key export markets, with Ukraine featuring prominently in this respect. In 1H 2007, Ukraine accounted for 7% of Georgian exports and 10% of Georgian imports - we intend to capitalise on our market-leading trade finance franchise to facilitate the trade flows. I would like to thank all my colleagues - old and new - as well as our advisors, for their tireless work over the past year in making this transaction happen.”
Gurgenidze expressed gratitude to the National Bank of Ukraine for their constructive and principled approach and looks forward to building a relationship with the new regulator in Ukraine. Gurgenidze thanked the Georgian embassy in Ukraine and specifically Ambassador, H.E. Grigol Katamadze, for his unrelenting support.
“As excited as we are about entering the Ukrainian market, we are continuing to look for other attractive opportunities in our vicinity, to further expand our footprint - carefully, without causing a management overstretch, and with our acquisition discipline intact,” said Gurgenidze.