GROUPAMA TO ACQUIRE OTP'S INSURANCE ARM
By mid-2008 France's Groupama will become the owner of the Bulgarian DSK Garancia insurance company and DSK Garancia life insurance company. Till then the French insurer is expected to acquire the two Bulgarian companies' present shareholder - Hungary's OTP Garancia, which is within OTP Bank group.
On Monday (February 11) it was announced that Groupama and the biggest Hungarian bank have signed an agreement. In addition to the purchase of OTP's entire insurance arm it stipulates long-term partnership as well. Groupama will pay almost EUR617MN for OTP Garancia and its subsidiaries in Bulgaria, Romania and Slovakia. Hungary's mass media announced that AIG, Zurich Financial Services and Aegon, were also among the candidates to acquire OTP Bank's insurance arm.
OTP Bank's Chief Financial Manager explained that the credit institution intended to use the money it would get from Groupama in order to continue its eastward expansion. We plan to spend the EUR617MN for the purchase of banks in Eastern Europe, Russia and the CIS countries, he specified.
This deal is an excellent opportunity for us to focus on our banking business, said OTP Bank's Supervisory Board Chairman and CEO Shandor Chani. We believe that OTP Garancia's growth in Central and Eastern Europe could be best supported when it goes to the hands of a powerful European company, such as Groupama. However, it remains our priority to offer insurance products to our clients, said he.
In fact, the agreement stipulates the opportunity that the French insurer would offer its products through OTP Bank's branch network in Hungary, Bulgaria, the Ukraine, Russia, Croatia, Serbia, Montenegro and Slovakia. That means that Groupama will have access to the database of clients which the credit institution services, or more than 10 million people in the region.
Therefore, Jean Azema, CEO of the French company, established in the 19th century, said that the deal was an excellent example of a situation when both sides get benefits. Through the transaction OTP Bank will get access to free money resource for continuing its expansion and will affirm its independence. At the same time Groupama already has a starting point for its expansion into Central and Eastern Europe. We view that acquisition as a stepping-stone for realization of our strategy for entering that quickly developing region, said Mr. Azema.
The closed agreement stipulates that the French would also acquire 8% of the Hungarian bank's equity. By closing the deal on OTP Garancia they will also buy 5% of the credit institution's stocks. Within the 12-month period afterwards they will have to pay for another 3% of the bank. However, the price of those packages of shares was not announced.