Sovcombank to buy HCF Bank, expects to close deal by year's end

MOSCOW. Feb 19 (Interfax) - Sovcombank plans to acquire HCF Bank, which now operates under the Home Bank brand, and expects to close the deal before the end of 2024, after obtaining all necessary regulatory approvals.

The transaction will take place in two stages, in the first of which Sovcombank will buy 51% of HCF Bank with an issue of new shares equivalent to 5% of its charter capital, Sovcombank said in a press release.

These shares will go directly to HCF Bank shareholders, Sovcombank first deputy CEO Sergei Khotimsky told reporters. HCF Bank's shareholders have pledged not to sell these shares before January 1, 2025.

In the second stage, Sovcombank will acquire the remaining 49% of HCF Bank by the end of 2024, with payment to be made in cash in instalments in 2024-2025.

Khotimsky said Sovcombank expects its own funds will be sufficient to cover the purchase and it is not planning a secondary public offering to finance the second stage.

HCF Bank's valuation for the deal amounted to 80% of its capital, not including perpetual bonds and dividends for 2023.

Sovcombank shareholders plan to discuss increasing charter capital to pay for the first part of the deal on February 29, the bank's managing director, Andrei Osnos said. "We will have an extraordinary general meeting on February 29 at which we will increase charter capital," he said.

The structure of the deal will enable Sovcombank to already consolidate HCF Bank's results in its financial statements in 2024, after securing approval for the transaction from regulators, the press release said.

Khotimsky said the bank expects to obtain the necessary regulatory approvals for the acquisition by the end of the first quarter of 2024.

"We expect that we will receive the necessary documents so as to legally formalize the deal, and these are all the relevant approvals [from the Federal Antimonopoly Service and Central Bank and corporate approvals], before the end of the first quarter. Thus, so that we will be able to already consolidate Home Bank's results in reporting from the first of April," Khotimsky said. The paperwork will be filed with regulators next week, he added.

"Work on integration will essentially begin on Monday. That is, the teams will begin to discuss what actions need to be taken, how and in what order, and an integration plan will be worked out. And, in our experience, within nine to 12 months the banks will be able to switch to a single license," Khotimsky said.

He also said that Sovcombank is unlikely to conduct any new mergers or acquisitions in the banking sector, but it is considering deals on the leasing and insurance markets.

"The likelihood of acquiring banks is very low, because the team will be busy integrating a big business. As for other segments, here we don't rule out such a possibility. We're interested in the leasing business, we're thinking about insurance, so there is such a possibility," Khotimsky told reporters.