Eesti Pank to sell its Optiva Pank shares to Sampo Finance Ltd.
PUBLIC RELATIONS DEPARTMENT
Sampo Finance Ltd, jointly owned by Sampo Insurance plc and Kaleva Mutual Insurance Company, has offered to purchase Eesti Pank's 57.9 per cent interest in Optiva Pank. The terms of the offer have been agreed to in principle by Eesti Pank. The offer is subject to the approval of the Boards and to a due diligence review to be performed by Sampo Finance plc. The parties expect to conclude the transaction by 30 June 2000. Following this, Sampo Finance Ltd. intends to make a follow up offer to Optiva Pank's minority shareholders.
In order to facilitate this transaction, the Eesti Pank as a major shareholder in a credit institution, has provided a temporary conditional guarantee in the amount of EEK 70mln to support the value of specific loans held by Optiva Pank AS. The terms of this arrangement do not increase Eesti Pank's outstanding exposure to Optiva Pank beyond the maximum availability under Eesti Pank's existing guarantee facilities.
Upon the execution of the sale and purchase agreement, this exposure will be included in an indemnity to be issued by Eesti Pank in respect of non/strategic assets identified by Sampo Finance plc which, given the lack of a liquid market, are difficult to value. The final list of assets to be covered by the indemnity will be formalized prior to closing. These are non-liquid assets most of which are currently in the process of being realized by the bank. Payments under the indemnity will be triggered only where the proceeds from the realisation of the assets are less than their carrying value in Optiva Pank's balance sheet. The indemnity will be issued for a period of up to two years. Eesti Pank's exposure under the indemnity extends to 100% of the first EEK 70mln of any losses realized by Optiva Pank on the sale of certain assets and 75% of any excess losses.
Eesti Pank's acquisition of its controlling stake in Optiva was part of several radical steps taken in October 1998 to stabilise the banking sector and prevent a possible systemic crisis. The investment was motivated entirely by monetary and banking policy decisions and was to have been of a temporary nature. Eesti Pank had committed itself to sourcing a strategic foreign investor for Optiva Pank by the end of the first half of 2000.
By selling its shares in Optiva Pank, Eesti Pank will meet one of its strategic targets, i.e. fully give up its shares in commercial banks operating in Estonia. With the same purpose, the central bank sold its 1.38 per cent share in Hansabank in December 1999. The central bank's disposition of its remaining shareholdings in the commercial banking sector may be regarded as a successful conclusion to another phase in the banking reform in Estonia. In the course of the reform, Estonian banking system has considerably strengthened, become better capitalised and more transparent as well as more reliable to all its customers.
Eesti Pank considers the entrance of a new strategic investor, Sampo Group into the Estonian banking market as a positive development. The central bank is convinced that the new owner of Optiva Pank, using its international know-how, will soon be able to further strengthen competition in the Estonian banking sector and offer new possibilities, such as joint insurance and banking services, to customers. Attracting strategic foreign investors into the Estonian banking sector has been one of the priorities of the central bank in recent years.