SEB acquires BfG Bank -a gateway to the German savings market

SEB acquires BfG Bank -a gateway to the German savings market *SEB purchases 100 per cent of the shares of BfG Bank AG for EUR 1.6 billion (DEM 3.1 billion or SEK 13.9 billion) from Crédit Lyonnais. *The acquisition forms part of the SEB Group's ambition to expand in Northern Europe in the area of savings and within Internet banking. *The German savings market is the second largest in Europe and characterized by strong growth. *The purchase amount corresponds to approximately 82 per cent of adjusted shareholders' equity. *Rights issue of SEK 4.1 billion offered to present shareholders. *The acquisition is expected to lead to a marginal increase in earnings per share for the year 2000 and to additional increases thereafter. BfG - a modern and growing savings bank BfG is the fifth largest privately-owned German bank, with 177 branch offices throughout the country. For the last couple of years, BfG has focused strongly on savings and banking services for well-off private individuals. This private customer concept has been very successful and the bank has attracted 240,000 new customers since 1996. Furthermore, BfG's customer satisfaction is the highest in Germany. In total, BfG has 1 million private customers, a market share of 1 per cent and SEK 110 billion in assets under management. BfG - a platform for continued Internet expansion BfG will provide SEB with a platform for continued international expansion in the field of Internet banking. BfG started its Internet activities a year ago and has now 16,000 customers. The bank was recently awarded a prize as the best and safest Internet bank in Germany. SEB is one of the world's leading Internet banks, with approximately 300,000 Internet customers in Sweden. SEB is now developing an Internet platform for application in the European market, starting in Denmark. Great potential in the German savings market This transaction represents an important step toward achieving one of SEB's most important goals - to become one of the leading asset managers in Northern Europe. The purpose is to create a platform for growth in the field of savings in Germany. In terms of individuals, the German savings market is the largest in Europe and the second largest in terms of assets under management. Today, only 10 per cent of savings are invested in mutual funds, although the annual growth rate is about 20 per cent. The German mutual fund market corresponds to 15 per cent of GDP at present, while the corresponding figures for Sweden and Great Britain are 29 per cent and 32 per cent, respectively. A further benefit of the deal is that a large part of SEB's operations will be carried out within the EMU area. Together with BfG, SEB will have SEK 720 billion in total assets under management. BfG has a very effective sales organisation, thanks to which the bank has grown more rapidly than the market as a whole. SEB intends to build further upon BfG's strong market position by focusing on mutual funds and life insurance products for the German market, enhanced securities analysis and new credit and charge cards. Part of BfGs' present activities consists of financial services for 7,000 corporate customers. In recent years, BfG has substantially reduced its corporate activities and risks. These operations will be reviewed from a strategic and profitability point of view in consideration of a possible co- ordination with SEB's existing German activities. "This deal is a logical and important step for us in order to create growth within one of our priority areas, asset management. After the merger of SEB and Trygg-Hansa, we have expanded in the field of asset management in Norway and Finland through acquisitions and organic growth. In 1998, we made inroads into the three Baltic markets, which we have developed further during 1999. In the summer of 1999, we entered the Danish market through the purchase of Codan Bank. Through the acquisition of BfG, SEB gets a platform for expansion in the large and growing German market," says Lars H Thunell, President and Group Chief Executive of SEB. "The strategic reasons for the transaction are aggressive and linked to our ambitions in the areas of asset management and Internet banking. BfG's strategy is in line with our own. The bank has made successful investments both in the savings market and in developing new channels of distribution. By making use of SEB's experience and competence, we will accelerate and enhance this development" Financing and financial consequences SEB will acquire 100 per cent of the shares from Crédit Lyonnais (holding 50 per cent). Other shareholders include Aachener und Münchner Beteiligungs-AG (holding 25 per cent) and Beteiligungsgesellschaft der Gewerksschaften (BGAG, holding 25 per cent). The purchase amount is EUR 1.6 billion (DEM 3.1 billion or SEK 13.9 billion), corresponding to approximately 82 per cent of BfG's adjusted shareholders' equity. Thus, the acquisition will not result in any goodwill for the SEB Group. The difference between adjusted shareholders' equity and the purchase amount will be earmarked for future restructuring costs to such extent as is warranted. The acquisition will be partly financed through a rights issue of approximately SEK 4.1 billion, with subscription privileges for the shareholders. In addition, SEB has entered into agreements regarding certain financing arrangements, comprising so-called hybrid capital that qualifies as both core capital and subordinated debt. It is SEB's intention to raise subordinated debt of approximately EUR 660 M (SEK 5.8 billion) in order to strengthen its capital adequacy. In addition, SEB intends to decrease the risk-weighted volume by a little more than EUR 4 billion (SEK 36 billion) before closing the deal. Comments by Jean Peyrelevade, President of Crédit Lyonnais: "We are very happy to have completed this deal with SEB, which will enable us to make progress in our strategy and meet the obligations imposed by theEuropean Commission. In SEB, we found a partner that recognised the excellent quality of BfG's retail banking network, which is one of the best-performing in Germany. This transaction will benefit BfG's employees and provide a firm basis for the bank to continue growing in future." Pro forma and based upon SEB's and BfG's financial position on 30 June, 1999 the acquisition, including the new issue and with an assumed increase of SEK 5.8 billion in subordinated debt and a decrease of the risk-weighted volume according to the above, would have meant a core capital ratio of 6.7 per cent and a total capital ratio of 9.4 per cent. BfG - a deal that will create value for SEB's shareholders BfG's result after tax for the first half of 1999 amounted to approximately SEK 0.6 billion. SEB's corresponding result would thus have increased, from SEK 2.3 billion to SEK 2.9 billion pro forma. SEB's total assets pro forma will increase by approximately SEK 375 billion, to approximately SEK 1,085 billion. The total synergetic effects and potential for cost improvements are expected to total DEM 120 M (SEK 540 M) per year. In addition to that, measures designed to encourage growth, estimated at a further DEM 120 M per year, will have an impact upon the result from the year 2003. Fiscal deductions for losses as regards BfG will lead to low levels of taxation for BfG for the next few years. The acquisition is expected to mean marginal increases in earnings per share for the year 2000 and to increased earnings thereafter. "We continuously review a number of strategic alternatives in order to grow and to create value for SEB and its shareholders", says Jacob Wallenberg, Chairman of SEB. "During recent years, we have carried out several deals. The purchase of BfG meets our criteria and is the most attractive transaction for us at present. It gives us an opening into Europe. It is well in line with our savings strategy, offering us a greater critical mass within the area of savings that will lead to increased efficiency. Furthermore, the financial conditions are most attractive. Above all, however, it will provide us with an opportunity for increased growth." Implementation of the transaction The acquisition of BfG is an important transaction for SEB. After the deal as such has been completed and financed, the most important phase will ensue: the implementation. Lars Lundquist, at present Executive Vice President of SEB and Head of the Asset Management business area, will be in charge of the implementation of the transaction. He will be proposed as Deputy President of BfG, reporting to SEB's Executive Management. Karl-Heinz Hülsmann will remain as President. In addition, a small number of people from SEB will be working in BfG. Lars H Thunell will be proposed as Chairman of the Supervisory Board of BfG. In order to ensure that real use be made of competence transfer and synergy effects, a project organisation will be set up in order to mirror BfG in Sweden. Top priorities will include the following: an accelerated pace of expansion within investments and the Internet, mutual transfer of knowledge, rationalisation of BfG's retail activities, a strategic overhaul of the corporate side from a profitability point of view as well as a possible co-ordination with SEB's existing activities in Germany. "Forming part of the SEB Group will offer new and interesting opportunities to BfG both as regards product development and the development of new channels of distribution," says Karl-Heinz Hülsmann, President of BfG. We welcome SEB as our new owner, with its clear strategic views on our activities." The transaction is subject to necessary permits and licenses from the authorities concerned. The take-over is expected to take place in January of the year 2000. Enskilda Securities and JP Morgan have acted as advisors to SEB on this transaction. The SEB Group The SEB Group is one of the largest financial groups in the Nordic area, with SEK 610 billion in assets under management and total assets of SEK 661 billion. SEB offers a broad range of banking and insurance services. The Group is represented in some 20 countries and has about 1.5 million customers and 11,700 employees. SEB has 260 branch offices throughout Sweden. In the beginning of 1999, SEB became shareholder in three banks in the Baltic region. Now, this Baltic venture makes up a separate business area within the SEB Group. In June of 1999, SEB made a strategic investment in Denmark when acquiring Codan Bank. BfG BfG is the fifth largest private commercial bank in Germany, with 5,300 employees and 177 branch offices throughout Germany. The bank has about one million private customers, more than 7,000 corporate clients and approximately SEK 110 billion in assets under management. BfG has a strong trademark in the German banking market, reporting the highest level of customer satisfaction and customer loyalty among the German banks (according to Emnidumfrage 1999). In 1999, BfG was awarded a prize as the best advisory bank in Germany by Manager Magazin. The bank reported a result of DEM 359 M for 1998 and total assets of DEM 83 billion. BfG also has a private bank in Luxembourg. The German savings market After Great Britain, the German market is the second largest of Europe, with a population of 82 million. During the 1990s, German household financial assets increased by about 7 per cent annually. The composition of German savings is different from the pattern in Sweden. Only 10 per cent of savings is invested in mutual funds compared with about 25-30 per cent in Sweden, although the growth rate in Germany is even stronger, about 20 per cent per year. The German mutual fund market corresponds to 15 per cent of GDP today, while the corresponding figures for Sweden and Great Britain are 29 per cent and 32 per cent, respectively. If the German market should reach the percentage level prevailing in Sweden, this would mean a doubling of the German market for mutual funds. Internet banking SEB has approximately 300,000 Internet customers and is a world leader when it comes to the share of Internet customers of the total stock of customers, a little over 20 per cent. In SEB, 35 per cent of all private payments, 20 per cent of private customers' stock transactions and 15 per cent of all mutual fund transactions are made via SEB's Internet bank. SEB is furthermore the majority shareholder of the French low-price Internet broker Self Trade. Also in the market for large companies, SEB occupies a leading Internet position, e.g. through its Trading Station for foreign exchange transactions. The Internet penetration in Germany is lower than in Sweden. BfG has offered Internet services for less than a year and has 16,000 Internet customers at present. In 1999, BfG was awarded a prize as the best Internet bank in Germany (TeleTrust, Germany). Summary CVs: Jacob Wallenberg, born 1956. Chairman of SEB, Skandinaviska Enskilda Banken, since 1998, Executive Vice Chairman of Investor AB, Vice Chairman of the Knut and Alice Wallenberg Foundation, Atlas Copco AB and AB Electrolux. Director of ABB and WM-data. Education: MBA, Wharton School, University of Pennsylvania. Except for the period 1990 to 1992, when he was Executive Vice president of Investor AB, Jacob Wallenberg has spent all his professional life in banking. During 1997, he was President and CEO of the SEB Group. Lars H Thunell, born 1948, President and CEO of SEB, Skandinaviska Enskilda Banken, since 1998. Chairman Swedish Bankers Association, Director Akzo Nobel AB. Education: University of Stockholm, PhD 1977, Harvard University Center for International Affairs: Research fellow 1975-76, Previous employment: 1977-83 American Express Co, New York, Finance Director and Chairman American Express Overseas Credit Corp., 1983-87: Asea AB, Sweden, Head of Finance, 1988-91: ASEA AB, Sweden, Executive Vice President, ABB Asea Brown Boveri Ltd Zurich, Executive Vice President and Chief Financial Officer. 1991-92: Nordbanken, Sweden, Executive Vice President and Deputy CEO, 1993-94: Securum, Sweden, Chief Executive Officer, 1994-97: Trygg-Hansa, Sweden, President and CEO. Lars Lundquist, born in 1948, Head of Asset Management and Executive Vice President SEB, Skandinaviska Enskilda Banken. Education: MBA 1972, University of Wisconsin. Previous employment: 1973-74 World Bank, 1975-78 Swedish Investment Bank, 1979-81 First National Bank of Chicago, Assistant Representative in Stockholm, 1982-87, SwedeBank, 1988-90 Carnegie Fondkommission, (Chairman of the Carnegie Group), 1991-94: Nordbanken Asset Management, Managing Director, 1995-97 Trygg-Hansa, General Manager. Karl-Heinz Hülsmann, born 1939, President and CEO BfG Bank AG since 1996, Previous employment: 1959-65, Diskont- und Kredit AG, Düsseldorf, 1965-67 Aug. Thyssenhütte AG, Duisburg-Hamborn, 1967-68, Honeywell GmbH, Frankfurt, 1968- 1991 KKB Bank AG, Düsseldorf, (part of Citibank since 1973). Karl-Heinz Hülsmann has worked for BfG since 1991. Comparison figures SEB BfG Number of private 1.5 million 1 million customers Number of corporate 130,000 7,000 customers Market share, private about 12 % about 1 % market Number of employees 11,700 * 5,300 *Total SEB Group, excluding Trygg-Hansa (non-life insurance operations) and the Baltic States SEB BfG, SEK bn SEK bn Assets under management, 30 610 110 Sept. '99 Total assets, 31 Dec. '98 690 365 For further information kindly contact: Gunilla Wikman, Head of Group Communications at SEB, Telephone number +46 8 763 81 25 Mobile phone +46 70 763 81 25 Lotta Treschow, Head of Investor Relations, Telephone number +46 8 763 95 59 Mobile phone +46 70 763 95 59 Boo Ehlin, Head of External information Telephone: +46 8 763 85 77 Mobile phone: +46 70 763 85 77 Heinrich Schaumburg, Head of Information at BfG, Telephone number +49 692 586 400 Press conferences will be held at: SEB's Head Office, Kungsträdgårdsgatan 8, Stockholm on 25 October, 1999, at 10.00 a.m. BfG's Head Office, Mainzer Landstrasse 16, Frankfurt on 25 October, 1999 at 4.00 p.m. This announcement is not an offer of securities in the United States, Canada, Australia, Japan or any other jurisdiction. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Copies of this announcement are not being and should not be distributed or sent in, or into, the United States, Canada, Australia and Japan. The making of the offer in, or to, residents or citizens of certain jurisdictions ("Foreign Shareholders") may be restricted by the laws of the relevant jurisdictions. Foreign shareholders should inform themselves about and observe any such applicable legal requirements into their respective jurisdictions. A prospectus containing the details of the rights offer will be distributed in due course, copies of which will be obtainable from Enskilda Securities AB during usual business hours during the course of the offer. The contents of this announcement for which SEB is responsible, have been approved by Enskilda Securities AB, a member of the Securities and Futures Authority, for the purposes of Section 57 of the Financial Services Act 1986. Enskilda Securities AB is acting for SEB and no one else in connection with the transaction and will not be responsible to anyone else for providing the protections afforded to customers nor for giving advice in relation to the transaction. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/10/25/19991025BIT00050/bit0001.doc http://www.bit.se/bitonline/1999/10/25/19991025BIT00050/bit0002.pdf