www.pwc.com.tr Sharing Deal Insight Merger and acquisition activity in Turkey’s financial sector January 2014 Financial sector insight With its significant contribution to the Gross Domestic Product (“GDP”) via robust growth rates, Financial Services (“FS”) sector continued to attract the attention of investors. In addition to Mergers and Acquisitions (“M&A”) activity, we witnessed eye-catching new market entrances to the financial sector which are expected to continue in the coming period. Total announced value of M&A in Turkish Financial Sector in 2013 is realized as € 1.3 billion, referring to a 63% drop on 2012’s equivalent figure of € 3.4 billion. The fall in deal value is mostly due to the lack of large or medium cap banking deals in 2013 compared to the prior year which witnessed a large banking deal, Denizbank, corresponding to c.88% of the total disclosed transaction value in 2012. FS M&A deals 30 7,000 Number of Deals 5,946 6,000 25 25 5,000 20 19 4,000 3,397 15 14 3,000 2,000 12 8 10 1,262 5 638 1,000 Deal Value (€mn) 89 - FY09 FY10 Banking The biggest banking deal of 2013 was the acquisition of 70.84% share in Alternatifbank (from Anadolu Endüstri Holding) by Commercial Bank of Qatar for € 360 million. Besides the continued foreign interest in the sector, Turkish investors also demonstrated an appetite in buying foreign owned banks within the country. For instance, Fibabanka agreed to acquire Societe Generale’s consumer finance business KrediVer. Moreover, Aksoy Holding (who holds 51.6% shares in Turcas) agreed to 2 PwC Sharing Deal Insight FY11 FY12 FY13 purchase 100% shares in Bahrain based TAIB Investment Bank. In 2013, one of the deals in the banking sector demonstrated the growth appetite of new entrants to the industry. Citibank Turkey’s retail banking business has been acquired by Denizbank whose stakes have been bought by Russian Sberbank in 2012. Leasing In 2013, the only M&A activity in the leasing sector was Commercial Bank of Qatar’s acquisition (through its subsidiary, Alternatifbank) of Alternatif Finansal Kiralama (ALease) from Anadolu Endustri Holding for approximately € 53 million (1.8x equity value). Insurance Insurance sector was the leader of the 2013 FS M&A League in terms of deal value. Four out of twelve deals in FS industry were related to the insurance sector, where the sector dominated nearly 70% of M&A activity in value (according to disclosed figures). FS Sub-Sector M&A Breakdown Deal value* per sector - FY13 4.1% 0.5% Deal value* per sector - FY12 0.6% 0.8% Insurance & Reassurance & Pensions 27.6% €360m €874m 2.7% 0.3% Banking Banking Insurance & Reassurance & Pensions Leasing Financial Intermediary Factoring €3,257m Others Others 67.1% 96.4% *Announced transactions 2013’s largest insurance transaction involved a bidder from Europe. Allianz SE bought 94% stake in Yapı Kredi Sigorta (non-life), including Yapı Kredi Emeklilik (life and pension) from Yapı Kredi Bank for € 684 million. Allianz SE’s share in Yapı Kredi Sigorta reached 99.78% after the mandatory tender offer (following the acquisition) for the company’s remaining stake held by minority shareholders. New Banking Licenses As the Banking Regulation and Supervision Agency (BRSA), the watchdog of the banking sector in Turkey, become more likely to grant new banking licenses to the financially robust investors (injecting USD 300 million capital is the prominent criteria), new entrances kept going in 2013. The banking watchdog approved two international banks to establish a bank in Turkey, namely Bank Intesa and Rabobank. Those banks are currently working on setting the operational license which is a prerequisite in order to start their banking activities. For instance, Bank of Tokyo Mitsubishi UFJ, who had received an approval to establish a bank at the end of 2012, became operational in the sector after the BRSA’s approval of the banking license for the bank. All these banks declared that they will mostly engage in wholesale banking in Turkey. At 31-Dec-13, NASDAQ OMX Group and Borsa Istanbul A.S. concluded an agreement, which includes the delivery of market-leading technologies and advisory services to Borsa Istanbul, and NASDAQ OMX taking 5% stake (with an option of additional 2%) in Borsa Istanbul. The parties will work closely together to strengthen Borsa Istanbul’s position and brand as the capital markets hub for the region. Financial Sector M&A deals in Turkey Target sector Target company Bidder company Bidder country Insurance & Reassurance & Pensions Yapi Kredi Sigorta Allianz Germany Stake acquired Deal value (€ m) 94.0% 684.0 Banking Alternatifbank Commercial Bank of Qatar Qatar 70.8% 360.2 Insurance & Reassurance & Pensions Acibadem Saglik ve Hayat Sigorta Avicennia Capital Malaysia 90.0% 189.5 Leasing Alternatif Finansal Kiralama Alternatifbank Turkey 95.5% 53.0 Factoring Fortis Faktoring A.S Teb Faktoring A.S Turkey 100.0% 6.0 Banking Societe Generale's Tukish consumer finance business Fibabanka Turkey 100.0% n.d. Banking Taib Yatirim Bank Aksoy Holding Turkey 100.0% n.d. Banking Citibank Turkey's retail banking business Sberbank Russia 100.0% n.d. Insurance & Reassurance & Pensions Demir Sigorta Hariri family UAE and Lebanon 90.0% n.d. Others 10.9 Total - FY13 *The deal list covers: • regulated sectors (Deals within payment systems sector were not taken into account). • over 5% share transfers • only acquisitions rather than open market purchases, tender offers etc. • fully completed deals (not pending ones for BRSA, CMB or Competition Board approval) 3 PwC Sharing Deal Insight ~1303.6* www.pwc.com.tr Contacts Zeynep Uras Partner Hüsnü Dinçsoy Partner +90 212 326 6062 [email protected] +90 212 376 5302 [email protected] Serkan Tarmur Partner Aykut Taşel Director +90 212 376 5304 [email protected] +90 212 355 5838 [email protected] © 2014 PwC Turkey. All rights reserved. In this document, “PwC” refers to PwC Turkey, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. “PwC Turkey” refers to Başaran Nas Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş., Başaran Nas Yeminli Mali Müşavirlik A.Ş. and PricewaterhouseCoopers Danışmanlık Hizmetleri Ltd Şti. which are separate legal entities incorporated in Turkey within the PwC Turkey organisation.