ATHENS (Reuters) - Greece's third-largest lender Eurobank (AT:EURBr) has a deal to buy Grivalia Properties (AT:GRIr) in an all-share acquisition that values the real estate firm at 780 million euros (691 million pounds), the bank said on Monday.
The acquisition, which offers Grivalia shareholders a 9 percent premium to Friday's closing share price, including a 40.5 million euro dividend, aims to strengthen Eurobank's capital base and its reduction of bad loans.
Eurobank is offering 15.8 shares for each Grivalia share.
The two companies said the merger would be capital and earnings accretive with fully loaded Core Equity Tier-1 (CET1) rising to 13.8 percent and pre-provision income to 0.28 euros per share.
"The combined group is targeting strong sustainable earnings per share and over 10 percent return on tangible equity in 2020," they said.
Toronto-based Fairfax Financial Holdings (TO:FFH), which holds 18.23 percent of Eurobank and 51.43 percent of Grivalia, will become the largest shareholder in the merged entity with a 32.93 percent shareholding.
The bank said it would cut its ratio of non-performing loans to 15 percent by the end of 2019 and reduce it to single digits by 2021.
Greek banks have the highest level of non-performing loans in Europe, with more than 45 percent classed as bad loans, the equivalent of 88.9 billion euros.
Banks have agreed with European Central Bank regulators to cut bad loans to 64.6 billion euros by the end of 2019.