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European Banks Under Tight Controls Encourage Mergers: Real M&A
2015-02-19 23:12:57.587 GMT


(For a Real M&A column news alert: {SALT REALMNA <GO>}.)

By Aaron Kirchfeld and Brooke Sutherland
(Bloomberg) -- New rules intended to make European banks
stronger may end up encouraging them to get bigger, too.
With the European Central Bank now the currency zone’s top
financial supervisor, the emphasis is on fewer and better-run
lenders. Euro-zone banks have more assets -- about $17 trillion
-- than almost every currency group tracked by the Bloomberg
World Banks Index, yet they are among the least profitable. The
confrontation between Greece and other euro-area nations is just
the latest crisis to beset the region as lenders contend with
declining profits and stricter regulatory requirements.
There’s only so much cost-cutting that banks can do, making
consolidation necessary to increase returns, said Cyril
Meilland, an analyst at Kepler Cheuvreux. And with the ECB’s
stress tests on the top institutions now completed, the
regulatory uncertainty that kept acquirers on the sidelines last
year has begun to diffuse. Institutions including Italian lender
Banca Monte dei Paschi di Siena SpA and even Germany’s
Commerzbank AG, one of the cheapest major financial firms, could
now become merger candidates.
“Financial institutions in Europe are looking at what they
can do to improve profitability in a slow-growth and low-rate
environment,” said Isabelle Seillier, the head of financial
institutions in the region at JPMorgan Chase & Co.
Regulatory and economic upheaval limited the number of
euro-area bank takeovers last year to about 30 -- the fewest
since at least 2003 -- even as global deal activity surged,
according to data compiled by Bloomberg. This year, things may
start to pick up.

ECB Oversight

The ECB now has direct responsibility for monitoring the
region’s biggest banks. The idea is to streamline and
standardize regulations across countries and mitigate future
financial crises by enforcing higher capital requirements. It
may have the additional side effect of driving more takeovers.
Euro-area banks tracked by the Bloomberg World Banks Index
had net income of about $30 billion during their most recently
reported 12-month period. That’s roughly as much as Australian
and Canadian banks in the index each earned, even though they
have just a fraction of the assets of their European peers. The
average return on assets for euro-zone banks is less than 0.1
percent -- about 10 times lower than that of U.S. peers.
“Consolidation is probably required in order for margins
to increase,” Meilland of Kepler Cheuvreux said. On the one
hand, “you have regulators which are probably not very happy to
see banks get bigger. At the same time they are pushing for it,
even though it is a non-intended consequence, by raising the
bars.”

Stress Tests

In its stress test of the region’s 130 biggest banks, the
ECB gave failing grades to 25 of them. Those that had
deficiencies were given as many as nine months to fill capital
gaps. Italian banks had the largest shortfall, making the
country a logical starting place for acquisitions.
In October, Banca Monte dei Paschi hired advisers to
explore all strategic options as it sought to replenish a 2.1
billion-euro capital deficiency. BNP Paribas SA and Unione di
Banche Italiane have both been cited as potential buyers for the
world’s oldest lender, though the chief executive officers of
the two banks have sought to quash deal speculation.

‘Popolari’ Plays

Italy’s cabinet last month also approved a decree to
convert the country’s cooperative lenders, known as popolari,
into joint-stock companies, making them more appealing to
investors and removing obstacles for consolidation.
Banca Popolare di Milano Scarl is among the likeliest
targets because it’s a small, cheap and overcapitalized bank
covering the richest part of the country, according to Fabrizio
Bernardi, an analyst at Fidentiis Equities.
Three-way combinations may be necessary to consolidate the
crowded Italian banking system. The best combination would
involve a deal between Banco Popolare SC and Credito Emiliano
SpA, followed by a merger with Banca Popolare dell’Emilia
Romagna SC, though that would take time, according to a report
this month from George Karamanos, an analyst at Keefe, Bruyette
& Woods Inc.
Banco Popolare SC Chief Executive Officer Pier Francesco
Saviotti told reporters in Milan Tuesday that the bank may play
a role in consolidation and that a combination with banks
including Popolare di Milano would be suitable.

German Lenders

Some lenders in Germany would have failed the ECB’s stress
tests if the fully phased-in regulatory standards had been
applied. That may lead to deals in that country as well,
Commerzbank CEO Martin Blessing said in November.
Commerzbank itself is one of the rare potential German
targets for acquirers seeking a shortcut to larger-scale
exposure in that country, Deutsche Bank AG analyst Benjamin Goy
wrote in an April report. The country’s second-largest bank,
valued at about $15 billion, is partially owned by the
government after a 2009 bailout.
ING Groep NV would be an interesting partner for
Commerzbank because of its strong presence in online banking and
higher market share in mortgages, according to the report from
Goy. The Dutch bank completed a bailout repayment last year. A
combination with UniCredit SpA would offer cost synergies, the
analyst said.
He put a deal a few years off in part because many would-be
acquirers are still in the process of deleveraging and lack the
firepower to tackle such a sizable acquisition. A more
streamlined regulatory landscape and Commerzbank’s cheap
valuation may increase the odds. The company trades at 0.5 times
its book value, a lower multiple than almost every other
similar-sized institution, according to data compiled by
Bloomberg.

Too Big?

The other big question is whether regulators would look
favorably upon large, cross-border megamergers like that.
“The ECB just took over as main regulator,” said
Christian Sole, an equity analyst in Brussels at Candriam
Investors Group, which oversees about 80 billion euros in assets
and is part of New York Life Investment Management. “My
impression is that they would prefer to be regulator for several
years and to be sure that they know what is going on before
allowing consolidation.”
Even so, as new capital requirements and regulations erode
profitability, banks are increasingly likely to seek deals. Some
assets are already on the block. General Electric Co. is
exploring options for its Polish banking unit and has asked
potential bidders to submit their interest, people with
knowledge of the situation said this month. The Netherlands,
which spent more than 95 billion euros in capital and guarantees
to bail out the finance industry, is also in the process of
disposing of financial assets including bank ABN Amro Group NV.

Weighing Options

Deutsche Bank is weighing options such as the sale of
assets, including its Postbank consumer-lending unit, as
Germany’s biggest bank reviews its strategy, a person with
knowledge of the matter said in January.
In Portugal, the country’s central bank has invited 15
suitors to the second phase of the sale of Novo Banco SA, the
lender that emerged from the breakup of Banco Espirito Santo SA.
Banco Santander SA and Banco BPI SA of Portugal have expressed
interest in bidding. CaixaBank SA this week offered to buy the
shares it doesn’t already own in BPI, potentially setting it up
to support the bank’s offer for Novo Banco.
“All of this kind of new regulation and increasing capital
requirements forces banks to either raise capital or to perform
more M&A in order to get economies of scale,” Al Alevizakos, a
London-based analyst at KBW, said in a phone interview. “The
M&A angle is going to be played after we have more clarity on
the capital positions for some banks.”

For Related News and Information:
Italy Banks Emerge as Biggest Losers in ECB Industry Health Test
ECB Skips Fireworks for Day One as Supervisors Ponder Bad Loans
European Bank Mergers Are Back on Agenda, BofA’s Meissner Says
ECB Reshapes Euro-Area Bank Landscape as Capital Race Quickens
European Central Bank dashboard: ECB <GO>
Top deal news: DTOP <GO>
Real M&A columns: NI REALMNA <GO>

--With assistance from Elisa Martinuzzi and Sonia Sirletti in
Milan, Nicholas Comfort in Frankfurt and Maud van Gaal.

To contact the reporters on this story:
Aaron Kirchfeld in Frankfurt at +44-20-3525-8830 or
akirchfeld@bloomberg.net;
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman

BN 02/19 21:46 *SANOFI NAMES OLIVIER BRANDICOURT CEO
BN 02/19 21:46 *SANOFI: BRANDICOURT TO TAKE UP NEW DUTIES ON APRIL 2, '15
BN 02/19 21:46 *SANOFI: BRANDICOURT HAD BEEN CHAIRMAN OF BAYER HEALTHCARE AG
BFW 02/19 21:46 *SANOFI: SANOFI NAMES OLIVIER BRANDICOURT AS CEO
BN 02/19 21:45 *SANOFI: TENURE AS CEO WILL BEGIN ON APRIL 2, '15
BN 02/19 21:45 *SANOFI: SANOFI NAMES OLIVIER BRANDICOURT AS CEO
BN 02/19 21:45 *SANOFI NAMES OLIVIER BRANDICOURT AS CEO

Sanofi: Sanofi Appoints Olivier Brandicourt as Chief Executive Officer
2015-02-19 21:45:48.350 GMT

Sanofi Appoints Olivier Brandicourt as Chief Executive Officer

class="hugin">                                                          
- Tenure as CEO will commence on April 2, 2015 -

Paris - February 19, 2015 - The Board of Directors unanimously appointed
Olivier Brandicourt as Chief Executive Officer of Sanofi.

Olivier Brandicourt has 28 years of global experience in the pharmaceutical
industry, most recently as Chairman of the Board of Management of Bayer
HealthCare AG and member of the Executive Council of Bayer AG. Previously,
Brandicourt held numerous positions of increasing responsibility within major
global pharmaceutical groups, such as Parke-Davis/Warner-Lambert and Pfizer.
Notably, Brandicourt served as a member of Pfizer's global Executive
Leadership Team from 2010 - 2013. 

A physician by training, Olivier Brandicourt's career includes several senior
positions in Europe,
Canada and the United States. As the head of various key healthcare divisions,
he has a broad range of expertise and knowledge of the pharmaceutical industry
and has led the launch of numerous new medicines and the completion of
strategic acquisitions and integrations.

Serge Weinberg, Chairman of the Board of Directors, Sanofi said, "Sanofi
undertook a rigorous selection process to identify the right person to lead
Sanofi forward at an important time for our company. I am very pleased that
Olivier Brandicourt will be the next chief executive officer of Sanofi.
Olivier Brandicourt's strong experience combined with his international
profile, deep knowledge of U.S. and emerging healthcare markets, and his
capability to unite teams will provide new dynamism to Sanofi's strategy of
diversification and innovation."

In agreement with his former employer, Brandicourt will take up his new duties
on April 2, 2015.

Forward-Looking Statements
This press release contains forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995, as amended. Forward-looking
statements are statements that are not historical facts. These statements
include projections and estimates and their underlying assumptions, statements
regarding plans, objectives, intentions and expectations with respect to
future financial results, events, operations, services, product development
and potential, and statements regarding future performance. Forward-looking
statements are generally identified by the words "expects", "anticipates",
"believes", "intends", "estimates", "plans" and similar expressions. Although
Sanofi's and MannKind's management teams believe that the expectations
reflected in such forward-looking statements are reasonable, investors are
cautioned that forward-looking information and statements are subject to
various risks and uncertainties, many of which are difficult to predict and
generally beyond the control of Sanofi and MannKind, that could cause actual
results and developments to differ materially from those expressed in, or
implied or projected by, the forward-looking information and statements. These
risks and uncertainties include among other things, the uncertainties inherent
in research and development, future clinical data and analysis, including post
marketing, decisions by regulatory authorities, such as the FDA or the EMA,
regarding whether and when to approve any drug, device or biological
application that may be filed for any such product candidates as well as their
decisions regarding labelling and other matters that could affect the
availability or commercial potential of such product candidates, the absence
of guarantee that the product candidates if approved will be commercially
successful, the future approval and commercial success of therapeutic
alternatives, the Group's ability to benefit from external growth
opportunities, trends in exchange rates and prevailing interest rates, the
impact of cost containment policies and subsequent changes thereto, the
average number of shares outstanding as well as those discussed or identified
in the public filings with the SEC and the AMF made by Sanofi and MannKind,
including those listed under "Risk Factors" and "Cautionary Statement
Regarding Forward-Looking Statements" in Sanofi's annual report on Form 20-F
for the year ended December 31, 2013, and those risks and uncertainties listed
in MannKind's annual report on Form 10-K for the year ended December 31, 2013,
and listed or described in subsequent reports filed by MannKind with the
Securities and Exchange Commission. Other than as required by applicable law,
neither Sanofi nor MannKind undertake any obligation to update or revise any
forward-looking information or statements.

Contacts:  

   

Media Relations Investor Relations
Gregory Miley Sébastien Martel
Tel.: + (33) 1 53 77 46 46 Tel.: + (33) 1 53 77 45 45
MR@sanofi.com ir@sanofi.com

                             
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Florence Coupry
fcoupry@image7.com
+33 6 63 44 27 59

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