(Bloomberg) -- Denmark’s largest mortgage lender Nykredit Realkredit A/S agreed to buy competitor Spar Nord Bank A/S in the latest consolidation move in the Nordic financial industry.
The deal values Spar Nord at about 24.7 billion kroner ($3.5 billion) based on a cash purchase price of 210 kroner a share and is recommended by its board, according to statements by the two banks on Tuesday.
The acquisition comes at a time when consolidation among Danish banks is “necessary” to keep up with new regulations and capital requirements, Spar Nord Chairman Kjeld Johannesen said in an interview.
“The future banking market will become more competitive,” he said. “We must have the cheapest financing and capital available in the market.”
Denmark’s financial sector is among the most fragmented in Europe, but has recently seen mergers and acquisitions pick up. In 2022, Jyske Bank A/S kicked off a consolidation trend as it took over all of Svenska Handelsbanken AB’s Danish activities, while this summer Sydbank A/S acquired Coop Bank A/S and Saxo Bank A/S put itself up for sale.
More broadly in Scandinavia, Danske Bank A/S last month transferred its personal banking business in Norway to Nordea Bank Abp and in October, Norway’s DNB Bank ASA announced a plan to buy Sweden’s Carnegie Holding AB.
Nykredit, one of Europe’s largest issuers of covered mortgage bonds, has been seeking to expand its banking operations in its home country, where the traditional lending market is dominated by Danske Bank A/S.
The takeover will combine Nykredit Bank, currently Denmark’s fourth-largest on lending volume with sixth-ranked Spar Nord, a 200-year-old bank serving retail clients and small-and medium-sized enterprises. The result will be the country’s third-largest bank with 13% of the market.
“Our goal is to play a significant role in the Danish banking market” and “create a long-term solution in the sector,” said Johannesen of Spar Nord, which currently has more of a regional presence.
The offer represents a premium of about 49% compared to Spar Nord’s closing share price on Monday. The stock advanced in line with the premium in Copenhagen on Tuesday, recording its biggest jump since at least 1991. That brings gains this year to more than 90%, outperforming the pan-European Stoxx Europe 600 Banks index that’s up about a quarter so far this year.
It’s about adding scale for Nykredit, with the deal set to “lower the group’s reliance on income from its mortgage business,” analyst Sverre Holbek at Danske Bank said in a credit note. “Geographical diversification should also increase with Spar Nord being particularly strong in Northern Jutland.”
Still, “the purchase price seems quite high,” Holbek said, entailing “significant additional issuance” of bonds for the lender.
Nykredit has been a major shareholder in Spar Nord since 2003 and currently holds just under a fifth of the share capital and voting rights. The lender expects to complete the offer in the first half of 2025 and delist Spar Nord from Nasdaq Copenhagen if its holding tops 90%.
Deal interest is also on the rise across Europe, with UniCredit SpA launching a takeover bid for Italy’s Banco BPM SpA and saying it’s considering an acquisition of Germany’s Commerzbank AG. Several senior bankers, including Danske Bank CEO Carsten Egeriis and the finance chiefs of ING Groep NV and Deutsche Bank AG, also said during the third-quarter earnings season that mergers are moving up their list of priorities again.
(Updates with chairman’s comments from third paragraph)
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