Luminor acquisition deal of the decade

Photo: Brendan McDermid / Reuters/Scanpix

It was announced yesterday that the world’s largest private capital firm Blackstone will acquire the majority of Luminor Group that will mark the biggest transaction in the Baltic countries for the past decade and could possibly be the greatest ever acquisition in the region. Blackstone will pay more than a billion euros for 60 percent of Luminor.

«It is a deal to rival the takeover of Hansapank,» said Sven Papp, partner at Blackstone’s counsel Ellex Raidla.

«It is the largest acquisition of a universal bank majority holding by a private capital firm in the world and one of the largest merger and takeover deals in the history of the Baltic countries,» Blackstone’s press release reads. Financial Times reports the transaction marks Blackstone’s first investment in the Baltics.

Because Nordea wishes to sell all of its shares in Luminor, the transaction could end up outshining the takeover of Hansapank by Swedbank in 2005. Such transactions are usually tied to a number of actions for which private capital firms charge a separate commission. Blackstone’s counsel in this matter will be former CEO of Swedbank Michael Wolf. Current CEO of Luminor Erkki Raasuke served as CFO of Swedbank during Wolf’s reign.

The transaction will be handled using Blackstone’s newest private capital fund worth $18 billion, giving Luminor substantial weight in the company’s portfolio. The fund is managed from London.

However, it needs to be said that of the €1 billion to be paid to Luminor’s current shareholders not a cent will reach Estonia. The money will go to Scandinavia. Estonia’s share will be the fees of Ellex Raidla and other consultants.

The bank’s current owners DNB and Nordea will keep 20 percent each, while the latter is in talks with Blackstone over selling its entire holding.

Nordea wants to simplify its business and concentrate on its main markets in Scandinavia.

DNB sees opportunity in the Baltic region. «We want to be among Luminor’s minority shareholders because we believe the company has value for its clients, employees and shareholders. The bank has a strong digital focus, very capable employees and a strong presence in the Baltic countries,» said CFO of DNB Kjerstin Braathen via a press release.

The Luminor acquisition should dissipate mistrust in Baltic banking as, especially Latvia and Estonia, have been associated with money laundering scandals lately.

CEO of Luminor Erkki Raasuke told Postimees that he would not have guessed the subject matter of money laundering to play such an important role in negotiations.

«During this process, we spent roughly 50 percent of our energy and attention on the know your client principle, money laundering and sanctions,» he says in an interview.

«Blackstone will undoubtedly lend credibility to the ownership structure of Estonian banks,» chairman of the board of the Estonian Financial Supervision Authority Kilvar Kessler said in a press statement. «Transparency and stability of ownership structure is equally important,» he added.

Luminor Bank was created on October 1 last year after Scandinavian banks DNB and Nordea decided to abandon their Baltic units and create an independent bank in their place.