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Unanswered questions surround BoB merger with Transorient

Shareholders in Transorient bank, which is to merge with Bank of Beirut, will receive an estimated $45 million and a 10 percent share of the united bank.

Senior officials at both banks have confirmed that the merger cost BoB $70 million in cash and shares.

Some observers consider that the secretive Transorient Bank has experienced some difficulties this year. Unlisted banks are not required to publish quarterly income statements or balance sheets as demanded by rating agencies, who have called for more transparency in Lebanese finance.

“Transorient has a bit of provisioning for bad loans to make and profits this year are not expected to exceed last year,” said one banker. “I would not say that BoB paid too much but that Transorient shareholders received an excellent price.” Most of the Transorient shares are held by the Millet family.

Analysts reserved final judgment until they saw the latest Transorient figures and learnt more about the deal. Salim Sfeir, chairman of BoB, declined to divulge anything before leaving the country at the weekend. Adib Millet, the chairman of Transorient, was not taking calls.

BoB estimates that Transorient’s total deposits rose 15 percent from January to September this year and reached around $373 million compared with $667 million for Bank of Beirut ­ a 10 percent growth.

The Transorient balance sheet went up around 12 percent compared with 14 percent for BoB. Assets of $435 million for Transorient and $890 million for BoB would represent a value of $1.325 billion for the new bank at the end of September.

At $45 million in cash, BoB would be paying about twice the book value of Transorient. Banque Audi paid about four times the book value for Credit Commercial Moyen Orient in its takeover last year.

“The ratio paid for Transorient is good and not two expensive,” said Bassem Yamin, banking specialist at Lebanon Invest. “This is a healthy and very good merger. It was needed to move BoB into a new league. Organic growth has become limited with every sector of the economy serviced by banks among intense competition.”

However, Mr. Yamin said that $45 million was still a considerable amount and that it remained to be seen how BoB would finance the purchase. BoB expects its capital of around $60 million to rise to $100 million after the merger. The bank will issue a $30 million euro CD at the beginning of next week.

“The middle banking sector has to merge. We’ll see more in coming months,” said Mr. Yamin. No investment banks took part in the merger.

 

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