Yesterday the Board of Eesti Pank authorised the
management of Eesti Pank to take an active role in the merger
process of Eesti Forekspank and Estonian Investment Bank as
well as to temporarily acquire a majority stake in both
banks.
According to the agreement between Eesti Pank, Forekspank
and Investment Bank, the majority stake shall be acquired as
follows:
Eesti Pank buys from Forekspank shares of Estonian
Investmentbank in the amount of 50.24 per cent for 135
million kroons.
Eesti Pank covers possible losses for up to 100 million
kroons from loans issued by Forekspank. The guarantee
agreement is automatically terminated after the closed issue
to Eesti Pank has taken place.
Through the closed issue, Eesti Pank acquires 12 million
shares in Eesti Forekspank with nominal value, i.e. 120
million kroons.
After the above steps have been taken and the merger of
Eesti Forekspank and Estonian Investment Bank has been
finalised and the shares of the latter have been exchanged
for those of Eesti Forekspank, the stake of Eesti Pank in the
new bank exceeds 50%.
The above steps are taken to achieve the capital adequacy
of the merged bank of at least 14%. The central bank shall
use for the transaction its excess reserves and thus the
investment has no influence on the Estonian monetary policy.
When making the decision, Eesti Pank proceeded from the
fact that despite of lack of capital, Eesti Foreskpank has
positive net worth and significant potential future value
after the merger with Estonian Investment Bank. The central
bank is convinced that through the merger process it is
possible to quickly and successfully re-organise the
activities of Eesti Forekspank and make these activities more
effective. Eesti Pank is convinced that a merger with
Estonian Investmentbank, whose capital base is one of the
strongest among Estonian commercial banks, together with the
central bank as a shareholder is the best option for
Forekspank.
Until the merger process is completed, the activities of
Eesti Forekspank and Estonian Investment Bank will have the
financial and moral support of Eesti Pank as the biggest
share-holder.
The future development of the merger process will take
place under the careful oversight of the state. Eesti Pank
shall nominate at least three members of the five-member
council of the merged bank and will take an active role in
forming the management.
At the same time, Eesti Pank will shortly start
negotiations for finding a strategic foreign investor for the
merged bank to whom the entire holding of Eesti Pank will be
sold by the end of 1999 at the latest.
Eesti Pank is convinced that the solution of all
problematic issues in a decisive, transparent and least
expensive way to the society, will strengthen the monetary
and banking sector as a whole and, more broadly, the Estonian
economy.
