(Bloomberg) -- Dubai's Emirates NBD PJSC confirmed it started talks with Sberbank PJSC to potentially acquire the Russian lender's wholly-owned Turkish unit Denizbank AS. Shares of Denizbank and Emirates NBD climbed.
Talks are at a “very preliminary stage and there is no certainty that any transaction will be entered into,” Dubai's biggest lender said in a statement on Tuesday. "Emirates NBD routinely evaluates potential opportunities in different markets and a further announcement will only be made if there is a material development."
Sberbank and Denizbank also confirmed the talks in separate statements. Discussions include the possibility of Emirates NBD acquiring Sberbank's shareholding in Denizbank, the Moscow-based lender said. “Talks are at a preliminary stage and there is no certainty that any transaction will be entered into,” it said.
Sberbank, which has been under U.S. and European Union sanctions since 2014, bought Dexia SA's Turkish unit Denizbank for about $3.5 billion in 2012. Denizbank was Turkey's ninth-largest lender by assets at the end of September, according to country's banking association. The Moscow-based lender also held discussions with other Gulf-based lenders, people familiar with the matter said on Monday.
Denizbank, which is held 99.9 percent held by Sberbank, rose as much as 20 percent to 5.77 liras in Istanbul, the highest level in more than three years. Emirates NBD shares in Dubai rose as much as 4.7 percent, while Sberbank fell as much as 1 percent in Moscow.
‘Changing Focus'
“In 2012, when Sberbank had excess capital it spent it on inorganic growth, buying assets in Turkey and Europe,” VTB Capital analyst Mikhail Shlemov said from Moscow. “That didn't work out so well, so it's good to see them changing their focus to shareholder returns.”
Denizbank's $3.4 billion book value, a gauge for a bank's valuation, was 87 percent of its market value at the end of September. This compares with a book value 33 percent higher than the market value in 2012.
“Even though Denizbank is profitable, it's not a core asset,” said VTB's Shlemov. “Even if they book a slight loss from goodwill, the sale will improve their capital adequacy levels and should help them boost capital distributions to shareholders.”
--With assistance from Jake Rudnitsky Dinesh Nair and Filipe Pacheco
To contact the reporters on this story: Kerim Karakaya in Istanbul at kkarakaya2@bloomberg.net, Asli Kandemir in Istanbul at akandemir@bloomberg.net, Ercan Ersoy in Istanbul at eersoy@bloomberg.net, Arif Sharif in Dubai at asharif2@bloomberg.net.
To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Shaji Mathew
©2018 Bloomberg L.P.
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