Vestjysk Bank - Bid from AL as expected

AL going to 61% ownership leads to mandatory bid DKK 3. 45 bid is in the low end of our fair value range Bid PE of 8x 2022e looks low vs. recent transactions Mandatory bid from AL after crossing the 1/3 ownership line Today, Arbejdernes Landsbank (AL) announced that it has taken over further 28% of the shares in Vestjysk Bank (VB) bringing its total ownership stake up to 61%. This leads to a mandatory bid of DKK 3.

45 for all shares in Vestjysk Bank corresponding to the price paid to Nykredit and AP Pension for the 28% stake just acquired (highest price paid by AL last six months). AL has to put out an offer documents within 4 weeks while the board of Vestjysk Bank recommends shareholders to await the boards position (advantages and disadvantages) on the offer. AL bid in the low end of our fair value range of DKK 2.

7-5. 5 Today’s bid is exactly as expected with the DKK 3. 45 per share being in the low end of our fair value range for Vestjysk Bank of DKK 2.

7-5. 5 with the high end including 50% of the annual synergies of DKK 200m we believe that AL could harvest in a merger with Vestjysk Bank in the long run. We do not believe running to separate banks in the long run makes sense.

Bid does not seem to reflect synergies With a bid PE for 2022e of 8x we believe AL is bidding a price below the level of recent Danish banking transaction of 12-13x next year’s PE and we do not believe the AL bid contains payment for potential synergies ahead. Thus, we struggle to see the board of Vestjysk Bank recommend the bid.