Vestjysk Bank - AL announces an upcoming bid

Stake of Arbejdernes Landsbank up to 60. 7% (32. 4%) Mandatory bid of DKK 3. 45 per share coming up VB share up today to reflect the 23% bid premium Bidding 7.

8x 2022e adj. PE and 0. 9x 2021e book value This morning, Vestjysk Bank (VB) announced that Arbejdernes Landsbank (AL) has entered into conditional agreements regarding purchase of shares in VB with Nykredit (divesting 11.

5% of the shares in VB) and AP Pension (divesting 16. 8% of the shares in VB). The purchase is conditional on approval of the Danish authorities.

With the purchase AL would increase its stake in VB from 32. 4% to 60. 7% and thus it has to submit a mandatory bid for all shares in VB.

AL will publish a bid of DKK 3. 45 per share, corresponding to the price in the transaction with Nykredit and AP. The bid price of DKK 3.

45 is 7. 8x 2022e adj. PE and 0.

9x 2021e book value of VB. It could be challenging to block the takeover… AL has been involved in Vestjysk Bank since 2017 when it helped to recapitalize the bank and it has put out a press release where it flags intentions of running Vestjysk Bank as a separate VB franchise. AL plans to raise equity in April to finance the purchase, which could be finalized in May.

Depending on the reception of the mandatory bid, AL will end up with 61%-100% of the shares in Vestjysk Bank, thus it could be challenging to organize the one third of the voting rights (no voting right restrictions) needed to block the takeover. …but the bid multiples appear quite low We do not find the bid multiples very high. A bid PE for 2022e of 7.

8x appear lower than recent transactions and does not reflect the synergy potential while P/NAV 21e of 0. 9x does not appear high compared to an outlook for 2022-2023 RONAV above 11% for VB. At this point in time, it is difficult to say whether the board of Vestjysk will put up a difficult fight for shareholder value, we will have to await a statement from the board on its position.