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Investors certify their interest in Citadele Bank



RIGA, 15 April 2014. The Cabinet of Ministers (CM) has got acquainted with the report of the SJSC “Privatisation Agency” (PA) and the consultant Société Générale about the progress of implementation of investor engagement strategy of Citadele Bank. The consultant informed the government that investors had certified their interest in becoming strategic investors of the bank by buying shares via the trade sale transaction; moreover, investors show interest in the initial public offering of shares (IPO) by buying shares at the stock exchange. The previous strategy of investor engagement approved by the government envisaged performing the study of both of the possible scenarios.

In accordance with the approved strategy, the consultant Société Générale addressed almost 100 investors that might become strategic investors of Citadele Bank. After getting acquainted with the information memorandum, several investors submitted non-binding offers. The range of potential interested parties includes both banks and financial investors.

Concordantly, the consultant continues the work on the study of the initial public offering of shares. The performed study of investors’ interest and market analysis certify that IPO as a mechanism of investor engagement is a serious alternative to be considered. The consultant recommended the CM to continue implementing both of the possible scenarios of investor engagement, in order for the government to return to the final decision this summer, when binding offers of investors will be received for the trade sale transaction. After that the government will be able to decide, which of the possible scenarios will correspond to the aims set by the government the best and will be the most advantageous.

In July 2013, the government decided to resume the process of investor engagement for Citadele Bank. In the report submitted to the government, it was concluded that the aim initially envisaged in the restructuring plan of “Parex banka” – creation of a stable financial institution – had been achieved. Citadele Bank formed according to the tasks of the restructuring plan is working successfully and with profit, and its further development requires attracting private capital.

In order to preserve the most flexible approach possible, the PA in cooperation with the financial consultant Société Générale is implementing the dual track strategy of investor engagement. This strategy envisages performing the study of investors’ interest in relation to the outright selling transactions of shares owned by the state, while simultaneously assessing the possibilities of organizing the initial public offer of shares at the stock exchange.

The advantage of the dual track process is the possibility of simultaneously addressing a greater number and different types of potential investors, taking the decision on the particular model after establishing the interest of investors. Such approach ensures the greatest mutual competitiveness of investors, which would ensure the most advantageous transaction for the state.

As it has already been reported, according to the competition procedure the international investment bank Société Générale has been approved as a financial consultant of the PA. The task of this consultant is to provide consultations to the PA regarding the best model of investor engagement for Citadele Bank, as well as to perform investor engagement. The international law office Linklaters has been selected as a legal adviser.

As from the commencement of its activity in 2010 Citadele has become a profitable group. Citadele Bank concluded 2013 with a net profit 15.2 million euros (10.7 million lats) and has managed to nearly double its profit in comparison with 2012. Citadele Group concluded the year with a profit of 13.7 million euros (9.6 million lats), that is better than in 2012.

Consistent with previous years, in 2013 Citadele Bank delivered another year of strong growth and improved performance. Operating income for Citadele Group was up by 10.2%, thus reaching 107.6 million euros (75.6 million lats). Conversely, the Bank's operating income increased by 20.7% and reached 88.4 million euros (62.1 million lats).

In 2012 the Baltic Institute of Corporate Governance recognized Citadele Bank as the best governed enterprise owned by the state in the Baltic States.

During the investor attraction process, Citadele will continue to operate as usual; concentrating on implementing its existing strategies and providing services to Retail, Corporate and Private Capital Management customers.

The PA owns 75% minus one of Citadele Bank’s shares, while the European Bank for Reconstruction and Development is the owner of 25% and one share.

Important Information

Société Générale is acting solely for the PA in connection with any arrangements, services or transactions referred to in this document and no one else. Société Générale is not and will not be responsible to anyone other than the PA for providing the protections afforded to the Clients of Société Générale or for providing advice in relation to the arrangements, services or transactions, referred to in these documents.

Société Générale is a French credit institution (bank) authorised and supervised by the Autorité de Contrôle Prudentiel et de Résolution (the French Prudential Control and Resolution Authority). Société Générale is subject to limited regulation in the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of Société Générale’s authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from Société Générale on request.

This announcement is not for distribution, directly or indirectly, in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia). This announcement does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States. The Shares mentioned herein have not been, and will not be, registered under the United States Securities Act of 1933 (the “Securities Act”).

The shares may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act. There will be no public offer of securities in the United States.