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Eurobank, Alpha Bank to swap shares for merger

Banks to exchange shares, rights issue to follow; Eurobank, Alpha to hold news conference at 1100 GMT; Alpha's Costopoulos to chair new bank - Eurobank source; Qatar, Latsis family to take part in rights issue; Boards to agree terms of the deal Monday

August 29, 2011 5:05 by

Greece’s EFG Eurobank and Alpha Bank will swap shares in a merger deal to be announced on Monday, a Eurobank official said, in a combination aimed at building a stronger group to face the sovereign debt crisis.

The deal, if approved by shareholders, will help the country’s second and third largest lenders weather a crisis in which the banking sector has been weakened by successive rating downgrades, deposit outflows and increasing loan impairments.

“The two banks will merge by exchanging shares and then a rights issue will follow. The rights issue will be in cash,” the Eurobank official told Reuters on Sunday.

Greek banking officials announced the deal on condition of anonymity on Saturday, saying the boards of the two banks would sign on the terms of the merger on Monday, with Qatar expected to participate via a rights issue.

Eurobank and Alpha Bank on Sunday sent an invitation for a joint news conference at 1100 GMT on Monday without spelling out what it would be about. Banking officials said it will announce the merger deal.

The Latsis family, a major shareholder in Eurobank which made its fortune in shipping, and Alpha Bank Executive Chairman Yannis Costopoulos will also participate in the rights issue, the Eurobank official said.

“The president of the new bank will be the president of Alpha Bank, Yannis Costopoulos, and it will have two CEOs, Nicholas Nanopoulos (currently EFG CEO) and Dimitris Mantzounis (currently Alpha CEO),” the official said.

Eurobank shares have fallen 51 percent since the beginning of the year and Alpha shares are down 50 percent.

Alpha Bank has a market capitalisation of 1.07 billion euros ($1.5 billion). Eurobank, which failed the latest EU-wide bank stress test, has a market capitalisation of 1.02 billion.

The government and Central Bank Governor George Provopoulos have long encouraged the country’s banks to merge to be stronger to face the country’s worst recession in four decades and the impact of the debt crisis.

Greek banks are the biggest private holders of the country’s 300 billion euro-plus debt, with a combined government bond portfolio of about 40 billion euros.

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