Vestjysk Bank - ABGSC’s DK small/mid-cap seminar feedback
DJS merger on track, potential DPS for 2021 Business as usual after AL bid, synergies not specified Our fair value range is DKK 2.8-5.5 including synergies Merger with DJS in January, upcoming bid from AL Today, Vestjysk Bank (VB) CEO Jan Ulsø Madsen presented at our virtual Danish small/mid-cap seminar. Following the merger with Den Jyske Sparekasse (DJS) in January, VB has a market share in Denmark of ~2%. Lending exposure is concentrated in Jutland, where VB has its 30 branches. The bank has ~660 employees and its exposure is tilted towards business customers (60%), and particularly agriculture (15%).
On 24 March, Arbejdernes Landsbank (AL) announced an upcoming bid on Vestjysk Bank of DKK 3.45 per share, corresponding to ‘22e adj. PE of 7.9x, which is significantly below the level of recent M&A transactions within the Danish banking sector. The bid is mandatory due to AL raising its stake from 32.4% to 60.7% (crossing the 33% ownership level).
Strong synergy execution on DJS, 10x AL branch overlap Madsen stated that the merger with DJS is on track, with a significant part of the minimum DKK 150m in synergies harvested by the end of January. The combined bank’s no. of branches has been cut from 34 to 30.
Vestjysk is moving its HQ from Lemvig to Herning, and the CEO said that the initial local disgruntlement among clients in Lemvig had settled down without VB losing business due to the merger. The CEO was very comfortable with DKK 310m in upfront loan loss charges due to economic uncertainty, while VB has a write-down account of DKK 3.2bn following the merger with DJS (16% of gross lending). The CEO did not say much about the upcoming bid from AL, but emphasised a “business as usual” approach, and pointed to AL’s communication about keeping the 10x branch overlap between the two banks and running VB as a subsidiary with its own board and management.
A dividend for 2021 is still possible if the merger with DJS runs smoothly (ABGSCe DKK 0.17). ....