Opinion of the Supervisory Council of AS Hansapank *
This opinion is issued by the Supervisory Council of AS Hansapank pursuant to Article 171 (2) of the Estonian Law on Securities Markets (Väärtpaberituru seadus) and pursuant to Article 21 of the Rules on Takeover Bids (Ülevõtmispakkumisreeglid) approved by the Decree of the Minister of Finance of the Republic of Estonia No 71 of 28 May 2002 in connection with the amended takeover bid dated 22 March 2005 (the “Amended Offer”) made by FöreningsSparbanken AB (“Swedbank”) to shareholders of AS Hansapank (the “Bank”).
The Amended Offer supersedes the original takeover bid released by Swedbank on 1 March 2005 (the “Offer”).
The Supervisory Council of the Bank hereby delivers the following information and opinions:
1. Members of the Supervisory Council and Management Board of the Bank
1.1 The Supervisory Council of the Bank (the “Council”) consists of the following members:
Mr. Anders Ek (Chairman of the Council)
Mr. Gunnar Okk (Vice-Chairman of the Council)
Mrs. Tiina Mõis
Mr. Lennart Lundberg
Mr. Endel Siff
Mr. Robert Charpentier
Mr. Staffan Crona
Mr. Anders Sahlen.
The Council notes that Mr. Anders Sahlen, the former Chairman of the Council of AS Hansapank, submitted his resignation in June 2004 and has since then not participated in the work of the Council. Therefore, Mr. Sahlen has not participated in evaluation of the Amended Offer and has not expressed his opinion on the Amended Offer.
1.2 The Management Board of the Bank (the “Board”) consists of the following members:
Mr. Indrek Neivelt
Mr. Erkki Raasuke
Mr. Priit Põldoja
Mr. Olli Ensio Heinonen
Mr. Aivo Adamson
Mrs. Kristina Siimar
Mrs. Ingrida Bluma
Mr. Ugis Zemturis
Mr. Giedrius Dusevicius
Mr. Druvis Murmanis
2. Relationships and agreements of Council and Board members with Swedbank
2.1 Mr. Anders Ek, the Chairman of the Council is employed by Swedbank and is a member of the Executive Management of Swedbank, a member of the Board of Directors of Swedbank (Luxembourg) S.A. Group and a member of the Board of Directors of Robur AB, a member of the Swedbank Group.
2.2 Mr. Lennart Lundberg, a member of the Council is employed by Swedbank. Mr. Lundberg is also the Deputy Chairman of the Council of AB Hansabankas, the Lithuanian subsidiary of the Bank, a member of the Council of A/S Hansabanka, the Latvian subsidiary of the Bank and a member of the Council of OAO Kvest Bank, the Russian subsidiary of the Bank.
2.3 Mr. Robert Charpentier, a member of the Council is employed by Swedbank. Mr. Charpentier is also a member of the Council of OAO Kvest Bank, the Russian subsidiary of the Bank.
2.4 Other members of the Council have no agreements or other relationships with Swedbank.
2.5 No member of the Management Board of the Bank has any agreement or relationship with Swedbank.
3. Members of the Council and Board elected by or upon proposal of Swedbank
3.1 All members of the Council were elected upon proposal made by a representative of Swedbank at the Annual General Meeting of the Bank on 19 April 2004.
3.2 No Board member has been elected or appointed upon proposal of Swedbank.
4. Conflicts of interest between members of the Council and Board, measures applied to avoid risks arising from conflicts of interests
4.1 There are no conflicts of interests for members of the Council who are related to Swedbank.
Messrs. Ek, Lundberg and Charpentier, members of the Council are employees of Swedbank. In order to avoid conflict of interest between their duties as members of the Council of the Bank and as employees of Swedbank they were excluded from preparation of the Offer and the Amended Offer and strict internal rules have been applied within Swedbank in order to avoid the disclosure of confidential information related to the Bank by the referred members of the Council of the Bank to Swedbank and from Swedbank to the referred members of the Council of the Bank in respect of the Offer and the Amended Offer.
4.2 The remaining members of the Council, Mrs. Mõis, Messrs Okk, Siff and Crona have no conflicts of interest in connection with the Offer or the Amended Offer and they did not participate in preparing of the Offer or the Amended Offer.
4.3 No member of the Board has any conflict of interest in connection with the Offer or the Amended Offer. No member of the Board participated in preparing of the Offer or the Amended Offer.
5. Information about shares owned by Council and Board members, intent to accept or reject the Amended Offer.
5.1 Mrs. Tiina Mõis, a member of the Council, owns 2,081,000 shares of the Bank. Mrs. Mõis has expressed her intention to accept the Amended Offer at 13.5 EUR per share.
5.2 Mr. Endel Siff, a member of the Council, owns 402,484 shares of the Bank. Mr. Siff has expressed his intention to accept the Amended Offer at 13.5 EUR per share.
5.3 Mr. Indrek Neivelt, the Chairman of the Board, owns 445,592 shares of the Bank. Mr. Neivelt has expressed his intention to accept the Amended Offer at 13.5 EUR per share.
5.4 Mr. Erkki Raasuke, a member of the Board, owns 53,620 shares of the Bank. Mr. Raasuke has expressed his intention to accept the Amended Offer at 13.5 EUR per share.
5.5 Mr. Priit Põldoja, a member of the Board, owns 10,000 shares of the Bank. Mr. Põldoja has expressed his intention to accept the Amended Offer at 13.5 EUR per share.
5.6 Mr. Olli Ensio Heinonen, a member of the Board, owns 4,000 shares of the Bank. Mr. Heinonen has expressed his intention to accept the Amended Offer at 13.5 EUR per share.
5.7 Mr. Aivo Adamson, a member of the Board, owns 1,100 shares of the Bank. Mr. Adamson has expressed his intention to accept the Amended Offer at 13.5 EUR per share.
5.8 Mrs. Kristina Siimar, a member of the Board, owns 19,048 shares of the Bank. Mrs. Siimar has expressed her intention to accept the Amended Offer at 13.5 EUR per share.
5.9 Mrs. Ingrida Bluma, a member of the Board, owns 46,920 shares of the Bank. Mrs. Bluma has expressed her intention to accept the Amended Offer at 13.5 EUR per share.
5.10 Mr. Ugis Zemturis, a member of the Board, owns 5,000 shares of the Bank. Mr. Zemturis has expressed his intention to accept the Amended Offer at 13.5 EUR per share.
5.11 Mr. Giedrius Dusevicius, a member of the Board, owns 1,736 shares of the Bank. Mr. Dusevicius has expressed his intention to accept the Amended Offer at 13.5 EUR per share.
6. Agreements for payment of compensation in case of a takeover bid
No member of the Council or Board has entered into any agreement with the Bank pursuant to the terms of which compensation is payable to such Council or Board member by the Bank or by any third person in case of a takeover bid for the Bank’s shares, such as the Offer or the Amended Offer made by Swedbank.
7. Advice obtained by the Council from Citigroup Global Markets Limited (“Citigroup”)
Citigroup has been engaged by the Supervisory Council of the Bank to advise on the fairness, from a financial point of view, of the price of the Amended Offer. On 23 March 2005, Citigroup delivered advice to the Supervisory Council of the Bank to the effect that, as of that date and based upon and subject to various assumptions, considerations and limitations provided therewith, its experience as investment bank and other factors it deemed relevant, the price of the Amended Offer was fair, from a financial point of view, to the shareholders of the Bank (other than Swedbank).
8. Opinion of the Council members related to Swedbank on the Amended Offer.
8.1 In the opinion of Messrs Ek, Lundberg and Charpentier Swedbank is a professionally managed bank with a long experience in the Bank’s core business i.e. retail banking. As an owner Swedbank understands the challenges and opportunities that the Bank is facing.
The proposed takeover bid will generally enhance the Bank’s conditions to be continuously successful in the growing markets where it is active. The developments in countries and regions bordering the Baltic countries will probably create opportunities for the future, which could be penetrated more powerfully by the Bank with the 100 % backing of Swedbank.
The funding of the anticipated growth of the loan portfolio will be crucial for the Bank in the future. Both the liquidity and cost of funds situation would benefit from full ownership by Swedbank, regardless of how the treasury activities would be organized.
Although no material structural changes are planned for in the Bank, according to the prospectus, the Bank’s cost efficient operations would in the long run gain from an optimisation of the new Group’s resource capacity.
The possibility to share experience and knowledge spontaneously or through organized career ladders leading in both directions between the banks would be to the benefit for the staff of the Bank.
With the full support of Swedbank, the Bank will have the capacity to continuously be in the forefront on an increasingly demanding market. This will be to the benefit of its customers and, thereby, to the benefit of the economic development in the Baltic countries.
The proposed takeover transaction is logical from a business point of view and our assessment is that it will contribute to a further positive development for the Bank and its staff.
Estonian takeover rules do not require members of the Council to express a view on the price offered by Swedbank. We believe that the price of the Amended Offer of EUR 13.50 per share is fair - a view that is supported by an opinion given by Citigroup.
The Amended Offer has no condition of 95% acceptance. We believe that this has no material impact on the Bank and its staff compared with the pre Offer situation.
We would like to draw the attention to the fact that a substantial number of shareholders have already accepted or have expressed the intention to accept the Amended Offer which supports our belief that the price is fair and that the envisaged positive effects for the Bank and its staff are achievable.
9. Opinion of the independent Council members on the Amended Offer
9.1 The following opinion is issued by the independent members of the Council of the Bank Mrs. Tiina Mõis, Mr. Endel Siff and Mr. Gunnar Okk pursuant to Article 171 (2) of the Estonian Law on Securities Markets (Väärtpaberituru seadus), pursuant to Article 21 of the Rules on Takeover Bids (Ülevõtmispakkumisreeglid) approved by the Decree of the Minister of Finance of the Republic of Estonia No 71, and in accordance with the general principles of the Commercial Code (Äriseadustik).
By this opinion, the independent members of the Council assess the impact of the Amended Offer on the Bank, its employees and clients and express their view of the amended purchase price.
Hansabank Group is operating in the fastest growing markets in the European Union: Estonia, Latvia and Lithuania. The Bank has recently also launched banking activities in Russia, a market with immense growth potential and speed of development. The Bank has continuously outperformed competitors in terms of growth and is deemed as one the most successful banks in Eastern Europe. Several analysts consider the Bank’s management to be the key to success. The main driver of management motivation and commitment until now has been the ability to execute independent strategy as a listed company.
Whereas we fully recognize the value adding effect the takeover would yield to Swedbank, we see no direct benefits that the said transaction would bring to the Bank. We deem possible synergies between the two banks as minor.
We acknowledge that by combining the assets, the bank may take bigger credit risks and expand at a greater speed in Russia. In terms of centralized financing, we see cost saving for Swedbank. For the Bank, on the other hand, centralized financing may not prove to be more efficient than borrowing from capital markets. If any, the possible gain is likely to remain within one per cent of the Bank’s revenues today.
In terms of IT, synergies are, at least in the foreseeable future, impossible, as the IT systems of the two banks have very little in common. It is also doubtful whether synergies could be found in product development area. The reason for this is that banking products are developed and offered in response to the needs of the local market. The developmental phases of the Baltic and Swedish markets, however, are quite different today.
As a listed company, the Bank benefits from direct feedback from the markets and is compelled to ensure transparency in management. De-listing would negatively impact the Bank’s image.
Having in regard the above arguments, we are of the opinion that the Amended Offer submitted by Swedbank on 22 March 2005 does not give grounds to reconsider our previous opinion of 15 March 2005 on the impact of the Offer on the Bank.
While considering the impact of the Amended Offer on the Bank’s employees and clients, it is crucial to take into account the following statements made by Swedbank:
- Swedbank has expressed its intention not to change the existing decision making process (including the process for passing credit decisions) nor the decision making authorities of the Bank’s management; furthermore, Swedbank will strengthen the communication between Swedbank and the Bank’s management; and
- Swedbank has expressed its intention not to alter the Bank’s organizational culture or its motivation system; furthermore, it has expressed intention to review the current performance pay and motivation system.
The above statements made by Swedbank allow us to believe that no substantial changes in servicing the Bank’s clients, including corporations that are based on Estonian, Latvian or Lithuanian capital, can be expected. Considering the above statements we can further state that Swedbank’s takeover would not bring along any significant changes for the Bank’s management and employees.
Based on the opinion of Citigroup on the Amended Offer, we feel that the revised purchase price of EUR 13.5 per share adequately reflects the fundamentals of the Bank and also includes a sufficient takeover premium.
9.2 The following opinion has been issued by the independent member of the Council of the Bank Mr. Staffan Crona: The higher price in Swedbank’s Amended Offer together with the abolition of the condition for the completion of the offer of a 95% acceptance by the shareholders will lead to a substantial strengthening of Swedbank’s ownership in the Bank, particularly in light of the fact that a large number of shareholders already have sold their shares in the market to Swedbank or announced their intention to accept the Amended Offer.
With regard to the interests of the Bank the most immediate effect of accepting the Amended Offer and thus the more dominant ownership of Swedbank would be the strengthening of the creditworthiness of the Bank and consequently more favourable funding costs. In the longer run a close cooperation between Swedbank and the Bank could lead to the realisation of synergies within various fields (e.g. IT development and product development) with increased productivity for the group as a whole.
Swedbank’s stronger ownership will not, in the short run, have any effects worth mentioning on the employment relationship of the Bank with its employees. In the longer run the comparatively low salary level together with the high skills in the Bank could very well lead to increased employment in the Bank through the reallocation of a part of the activities from Sweden to the Baltic States.
A prerequisite for the realisation of the synergies of this Amended Offer is that the Bank can continue its operations with a certain degree of independence as a separate legal entity within the Swedbank group and under the common brand name of Hansabank. This is important to avoid too much of inefficient bureaucracy and is one of the reasons behind the Bank’s success so far. I welcome the fact that there are no indications in the prospectus of any changes in this respect within the foreseeable future. This should also be in line with Swedbank’s strategy of a decentralised organisation.
The fairness of the price has to be judged in light of the fact that a large number of shareholders have already sold their shares in the market to Swedbank or announced their willingness to accept the Amended Offer and also in the light of the fact that the price is noticeably higher than the price that was regarded as inadequate by Citygroup in their advice based on the original Offer and also higher than the price range within which the share was traded before the Amended Offer was announced.
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