With the near collapse of the Chinese stock market, Angbang Insurance’s €3.5 billion conditional bid for Novo Banco may also be sliding off the rails.
The Bank of Portugal’s August 31st deadline to sell Novo Banco has put the parties under pressure but BoP governor Carlos Costa (pictured) has the option of reopening negotiations with the US venture capital fund Apollo, if the Anbang deal is not achievable.
In addition to concerns about the Chinese economy and stock market crash, the Bank of Portugal has been unable to chip away at the condition insisted on by Anbang that it is indemnified from future legal claims against Novo Banco.
The conditions imposed by the Chinese leaves the Bank of Portugal looking at an unenviable financial and political situation.
The government will come in for sharp criticism having bailed out BES with €4.9 billion squeezed from Portugal’s banks and removed from taxpayers’ funds. The government is keen to see the money replaced in full from the Novo Banco sale before the October 4th general election.
There's another problem as reported in the Financial Times today - ‘there were signs that European Central Bank officials had privately expressed reservations over a Chinese group acquiring a systemically important eurozone lender and that the Bank of Portugal was getting cold feet.’
The Bank of Portugal has kept the bids from Apollo and Fosun on ice and could go back to either or both to elicit enhanced offers despite earlier having shelved these offers in favour of Anbang’s €3.5 billion enhanced bid.
Anbang sent its best team to Lisbon to negotiate with the Bank of Portugal whose trump card is to pull the deal.
This still would leave the Bank of Portugal’s team in a weakened position when reopening any negotiations with Apollo or Fosun. These two companies also may insist that the results of forthcoming ‘stress tests’ on the European banking sector leading to capital injections are discounted from their offer prices.
In addition to the stress test identifying a need for a more capital, there is the question of the group of 2,500 ripped-off BES depositors and of Goldman Sachs which both are taking the Bank of Portugal and Novo Banco to court for the return of their investments.
The Bank of Portugal’s Carlos Costa is known by Lisbon's banking sector for being controlled by the government and will take instruction from Prime Minster Pedro Passos Coelho and Finance Minister Maria Luís Albuquerque both of whom will be seeking a politically acceptable solution.
Of the resulting fiasco, the story that is easiest to spin to the electorate is the one that will take precedence.
Comments
Due diligence checks would be normal. It is fortunate for any bidder that they do not need to rely on the inherent Portuguese obsessive secrecy and innate intent to deceive to get a valuation of Novo Banco. A few minutes down at the local library will show enough pages of newsprint to get them thinking. "Are we buying a 'pig in a poke' ?"
Left to the Bank of Portugal's valuation Novo Banco would be described as safe as the 'Old Lady of Threadneedle Street (Bank of England)'. Rock solid. No claims against the new owner. So a clean slate.
Ho ho.