Commerzbank AG / Key word(s): Capital Increase
13.03.2013 / 11:10
THIS PRESS RELEASE AND THE INFORMATION CONTAINED HEREIN ARE NOT BEING ISSUED AND MAY NOT BE DISTRIBUTED IN THE UNITED STATES OF AMERICA, CANADA, JAPAN OR AUSTRALIA.
- Complete repayment of silent participations of SoFFin (EUR 1.6 bn) and Allianz (EUR 750 m)
- Capital increase with subscription rights of EUR 2.5 bn; 10:1 share consolidation
- Clear improvement in capital structure and ability to pay dividends
- Fully phased-in Basel 3 Common Equity Tier 1 ratio expected to increase after transaction to 8.6 % (pro forma at year-end 2012), up from 7.6 % at year-end 2012
- Blessing: 'With the complete repayment of the silent participation of SoFFin, we are repaying ahead of schedule all components of the state support over which we have influence.'
Commerzbank is planning an early repayment in full of the silent participations of the Financial Market Stabilization Fund (SoFFin) of about EUR 1.6 billion and Allianz of EUR 750 million by means of a combined cash capital increase/capital increase through contributions in kind with subscription rights in the amount of EUR 2.5 billion. The capital increase is to be approved at the annual general meeting of Commerzbank, which is being brought forward to April 19, 2013. After the completion of the capital increase, SoFFin's shareholding in Commerzbank is expected to decrease from 25 % plus one share to below 20 %. The regulatory capital structure of Commerzbank will be considerably improved by this transaction. The fully phased-in Basel 3 Common Equity Tier 1 ratio will increase as a result of this the transaction from 7.6 % as of year-end 2012 to 8.6 % on a pro forma basis as of that date.
'With the complete repayment of the silent participations of SoFFin we are repaying ahead of schedule all components of the state support over which we have influence. At the same time we are improving Commerzbank's fully phased-in Basel 3 capital base on a sustainable basis and are enhancing future dividend paying ability,' said Martin Blessing, Chairman of the Board of Managing Directors of Commerzbank. 'The support of politicians and the taxpayer was very important for us during the financial crisis. We would once again like to take this opportunity to thank them for this support. For us the repayment of the silent participations and the reduction in the Federal Republic's stake marks the beginning of the end of the Federal Republic's engagement in Commerzbank.'
Silent participations of SoFFin to be repaid in full
During the financial crisis, the Federal Republic supported Commerzbank with silent participations totaling EUR 16.4 billion in two steps in 2008 and 2009. The Bank has already repaid EUR 14.3 billion of this amount in 2011 together with a one-time payment of EUR 1.03 billion. With the announced repayment of the remaining EUR 1.6 billion, the silent participations of the Federal Republic will be repaid in full. At the same time SoFFin will receive a one-time payment of approximately EUR 60 million to compensate for the early repayment.
In addition to the silent participations, the Federal Republic had also acquired shares in Commerzbank, with the effect that its full exposure in the Bank amounted to about EUR 18.2 billion. Following the announced repayment in full of the silent participations, including debt servicing costs and compensatory payments, a total of about EUR 14.5 billion, or approximately 80 %, will already have been repaid. Commerzbank will then have repaid all the elements of the state support over which it has influence.
The announced repayment in full of the silent participations is also in line with the coalition agreement of the Federal Republic, which states that state support measures should be repaid swiftly following the end of the crisis while safeguarding the interests of the taxpayer. With the announced repayment, Commerzbank is now repaying the silent participations more quickly than planned.
Commerzbank using favorable capital markets environment
Commerzbank is taking advantage of the currently attractive capital markets environment for the early repayment of the silent participations and the planned capital increase. The associated capital measures require the approval of the annual general meeting of Commerzbank, the date of which has been brought forward from May 22, 2013 to April 19, 2013.
The annual general meeting will be asked to resolve on a combined EUR 2.5 billion cash capital increase/ capital increase through contributions in kind with subscription rights for the existing shareholders. The subscription rights ensure that the existing shareholders are able to maintain their stake in Commerzbank through the purchase of new shares. Furthermore, the general meeting is to decide on a capital reduction through the consolidation of shares in a ratio of 10:1. The consolidation of shares will cause the number of shares outstanding prior to the capital increase to decrease from 5.83 billion shares to 583 million shares. The stock consolidation and subsequent capital reduction have no impact on the amount of balance sheet equity capital of Commerzbank. They will, however, reduce execution risk for the capital increase. The full agenda for the annual general meeting, which also includes the terms of the proposed resolutions on the capital measures, will be published on 18 March 2013.
Deutsche Bank, Citi and HSBC have, on customary market conditions, agreed to underwrite the entire volume of the capital increase totalling EUR 2.5 billion.
The completion of the capital increase and the trading period for the subscription rights are planned for the period from mid-May to early June 2013. The subscription price will be determined in mid-May with a customary discount to the theoretical ex-rights price (TERP) on the day the subscription ratio is set. The Board of Managing Directors of Commerzbank will decide on the subscription ratio and the number of shares to be issued, as well as further details of the capital increase, with the consent of the Supervisory Board. The newly issued shares will have full dividend rights as of January 1, 2013.
SoFFin intends to support the transaction by exercising its subscription rights in full and, in proportion to its stake in Commerzbank, contributing silent participations in the amount of approximately EUR 625 million for shares. On behalf of SoFFin, the consortium of banks will, at the beginning of the subscription period, place with investors approximately EUR 625 million worth of Commerzbank shares out of SoFFin's holdings. This is intended to ensure that the sales proceeds correspond to the volume of the silent participations used in exercising the subscription rights.
SoFFin will thereby participate in the capital increase without investing new capital. SoFFin will be repaid the remaining volume of its silent participation out of the proceeds of the cash capital increase. If, as intended, the Commerzbank shares from SoFFin's holding are placed with investors and the subscription rights of SoFFin are fully exercised, SoFFin's shareholding following the transaction is expected to fall to below 20 %. SoFFin and Commerzbank intend to commit themselves not to sell or issue any shares in the 180-day period following the execution of the transaction.
Further improvement in capital base
Commerzbank has significantly improved its capital base in the last few years through retained earnings and the reduction of risk-weighted assets, as well as through capital measures. This has meant that the Bank surpassed current regulatory requirements with a Core Tier 1 ratio (pursuant to Basel 2.5) of 12.0 % at year-end 2012. However, analysts and investors are already anticipating to the full application of Basel 3, which is only expected to become fully effective from 2019 onwards. Upon successful completion of the transaction, including the planned repayment of the silent participations and the associated capital increase, this fully phased-in Basel 3 Common Equity Tier 1 ratio would increase from 7.6 % at year-end 2012 to 8.6 % on a pro forma basis as of that date. 'The improvement of our capital resources has the highest priority for us. In this respect we are making major progress with this capital measure, with the effect that we are already aiming to reach a fully phased-in Basel 3 Common Equity Tier 1 ratio of 9 % by the end of 2014. At the same time we are enhancing Commerzbank's dividend payment ability in the future, thanks to the complete repayment of the silent participations of SoFFin and Allianz and the resulting reduction in debt servicing costs' said Chief Financial Officer Stephan Engels.
Improvement in the ability to pay dividends
Commerzbank sees benefits for its shareholders in the early repayment of the silent participations. With the resulting reduction of debt servicing costs and the removal of the obligation to repay the silent participations of SoFFin and Allianz, dividend payments may be possible at an earlier date in the future. The capital increase with subscription rights also ensures that existing shareholders are able to acquire new shares on a pro rata basis, thus preserving their proportional interests and avoiding dilution. Alternatively they also have the alternative of selling those subscription rights which they do not wish to exercise and thus receiving financial compensation for the resulting dilution.
Commerzbank offers shareholders 'settlement of fractional shares' in the share consolidation
The number of outstanding Commerzbank shares will be reduced to one tenth of the current level in the planned share consolidation, while the share price is multiplied by ten. Thus, there is no economic change for shareholders. For shareholders whose current number of shares is not divisible by ten, Commerzbank is offering to evening-up fractional shares. The shareholders can decide individually whether to buy or to sell fractional shares. Commerzbank will pay the associated custody bank commission. This shareholder-friendly solution should ensure that existing shareholders are not burdened financially by the stock consolidation and reduction in the number of shares.
Richard Lips +49 69 136 22461
Armin Guhl +49 69 136 42764
Simon Steiner +49 69 136 46646
Commerzbank is a leading bank in Germany and Poland. It is also present worldwide in all markets for its customers as a partner to the business world. With the business areas Private Customers, Mittel-standsbank, Corporates & Markets and Central & Eastern Europe, it offers its private and corporate clients as well as institutional investors the banking and capital market services they need. With some 1,200 branches Commerzbank has one of the densest branch networks among German private banks. In total, Commerzbank boasts nearly 15 million private customers, as well as 1 million business and corporate clients. In 2012, it generated revenues of just under EUR 10 billion with approximately 56,000 employees on average.
The information contained herein serves information purposes and does not constitute a prospectus or any offer for sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities for the purposes of EU Directive 2003/71/EC. Securities will solely be offered on the basis of a prospectus or other offering circular to be issued by the company in connection with such offering. Subject to approval by the German Federal Financial Services Supervisory Authority, a prospectus will be available free of charge from COMMERZBANK AG (Kaiserstraße 16 (Kaiserplatz), 60311 Frankfurt am Main) and on the website of COMMERZBANK AG under www.commerzbank.com. The securities will be offered exclusively on the basis of the prospectus required to be approved by the Federal Financial Services Supervisory Authority.
This press release does not constitute an offer to sell securities, or a solicitation of an offer to buy securities, in the United States of America. Securities may not be offered or sold in the United States of America absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended (the 'Securities Act'). The securities of COMMERZBANK AG described herein have not been and will not be registered under the Securities Act, or the laws of any State, and may not be offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable State laws. COMMERZBANK AG does not intend to register any portion of the offering in the United States or conduct a public offering of securities in the United States.
This press release is for information purposes only and does not constitute an offer document or an offer of transferable securities to the public in the U.K. to which section 85 of the Financial Services and Markets Act 2000 of the U.K. ('FSMA') applies and should not be considered as a recommendation that any person should subscribe for or purchase any of the Securities. The Securities will not be offered or sold to any person in the U.K. except in circumstances which have not resulted and will not result in an offer to the public in the U.K. in contravention of section 85(1) of FSMA.
The communication of this document is restricted by law; it is not intended for distribution to, or use by any person in, any jurisdiction where such distribution or use would be contrary to local law or regulation.
This press release is not being distributed by, nor has it been approved for the purposes of section 21 of FSMA by, a person authorised under FSMA. This document is being communicated only at (I) persons who are outside the United Kingdom (II) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the 'Order') or (III) high net worth companies and other persons within the categories described in Article 49(2)(a) to (d) of the Order (all such persons together being referred to as 'Relevant Persons').
Any person who is not a Relevant Person should not act or rely on this document or any of its contents. The Securities are available only to, and any invitation, offer or agreement to purchase will be engaged in only with Relevant Persons. Persons in possession of this document are required to inform themselves of any relevant restrictions. No part of this document should be published, reproduced, distributed or otherwise made available in whole or in part to any other person without the prior written consent of COMMERZBANK AG.
This release contains forward-looking statements. Forward-looking statements are statements that are not historical facts. In this release, these statements concern the expected future business of Commerzbank, efficiency gains and expected synergies, expected growth prospects and other opportunities for an increase in value of Commerzbank as well as expected future financial results, restructuring costs and other financial developments and information. These forward-looking statements are based on the management's current expectations, estimates and projections. They are subject to a number of assumptions and involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to differ materially from any future results and developments expressed or implied by such forward-looking statements. Such factors include the conditions in the financial markets in Germany, in Poland, elsewhere in Europe and other regions from which Commerzbank derives a substantial portion of its revenues and in which Commerzbank holds a substantial portion of its assets, the development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of Commerzbank's strategic initiatives, the reliability of Commerzbank's risk management policies, procedures and methods, and other risks. Forward-looking statements therefore speak only as of the date they are made. Commerzbank has no obligation to periodically update or release any revisions to the forward-looking statements contained in this release to reflect events or circumstances after the date of this release.
Tel.: +49 69 136 - 22830
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