ARTESIA BANKING CORPORATION JOINS THE DEXIA GROUP IN RETAIL FINANCIAL
SERVICES, THE NEW COMBINED OPERATION WILL BE TOP 2 BANCASSUREUR IN BELGIUM
Dexia, a European banking group, holding the global leadership
in public finance, with assets of over 256 billion and market capitalisation
of ¿18 billion, and Arcofin, a Belgian financial services group with consolidated
assets of ¿75 billion, have announced today that their respective subsidiaries
Artesia Banking Corporation (Artesia BC) and Dexia Bank, the Belgian financial
services arm of Dexia, will be merged.
· Creates a leading Belgian bancassurance group.
· Banking and insurance activities of Artesia BC and Dexia Bank
to be fully integrated, resulting in yearly pre-tax synergies of 200 million
to be realised by 2005
· Artesia BC brings complementary capabilities to the Dexia
group, including additional asset management, on-shore private banking in
the Benelux and France and financial services to non-profit organisations
and corporate clients
· Transaction value of 3.3 billion
· Arcofin, Artesia BC"s major shareholder, will receive 17.9
million shares in Dexia representing an ownership interest of 15.5% of the
· Arcofin fully supports the transaction and is committed to
supporting Dexia"s growth strategy as a stable long term shareholder in Dexia
while creating a stable dividend stream for its co-operative shareholders
· Arcofin will be represented at the Board of Dexia. Dirk Bruneel,
the CEO of Artesia BC, will join the Executive Committee of Dexia Group.
· Following two major acquisitions realised by Dexia in 2000
(Financial Security Assurance and Labouchère), the Artesia BC transaction
represents the third element of Dexia"s expansion strategy in its other core
business: Belgian financial services
Reasons for the Combination
The rationale for a combination of Artesia BC and Dexia is compelling:
· Continues Dexia"s profitable growth strategy
Dexia"s vision of the future is that financial institutions
must hold global or pan-European leadership in activities with cross border
scope, whilst holding a strong franchise in their original regional base.
Dexia has pursued an acquisition programme which complies with both profitable
growth and low risk profile objectives.
The merger of Dexia Bank and Artesia BC builds on this strategy,
and follows the successful acquisitions of Financial Security Assurance in
the United States and Bank Labouchère in the Netherlands during 2000.
· Creates a leading provider of retail financial services in
The new Dexia Bank will be a leader in Belgian retail financial
services. The Bank will rank as a top 2 provider of retail banking services
and unit-linked life insurance. The new institution will have a powerful distribution
network, bringing together 930 branches from Dexia Bank and 584 from Artesia
BC. The network management of the two banks is organised in a comparable way,
based on a regional management structure, which will ease the integration
process. Resources allocated to alternative distribution channels, including
phone and internet banking will also be pooled. Dexia Bank"s strategy will
be to increase cross selling to the combined customer base, particularly savings
products to the affluent personal banking sector.
· Combines the complementary strengths of the two institutions
Artesia BC is established in on-shore private banking in the
Benelux and France. Its insurance arm, DVV, brings a strong position in life
insurance, particularly in the high growth "Branch 23" unit linked product
(2000 equivalent annual premiums of ¿900 million). Artesia BC brings an additional
¿16.5 billion assets under management and its asset management business has
experienced rapid growth and a strong performance track record. Dexia Bank
on the other hand brings its unique retail distribution model, based on highly
motivated, self employed agents. Combining compatible distribution systems
and complementary competencies, the two parties will have a highly visible
franchise in the market and an enhanced scale in back office processing.
· Optimises economic capital to maximise risk adjusted returns
Dexia intends to overlay its rigorous capital allocation methodology
for the combined portfolio of businesses. The objective is to direct resources
towards the areas of business with the highest returns and growth potential
whilst minimising the risks. Based on work completed so far, it is expected
that, over time, there will be an increase in capital allocated to life insurance,
private banking and asset management activities. The relative share of capital
allocated to retail banking and non-life insurance is expected to remain broadly
constant, while resources tied up in capital markets and corporate and investment
banking will be managed downwards progressively. A review will take place
at the outset so as to evaluate capital allocation plans in each business
· Enables the realisation of significant synergies
The combination will enable estimated yearly pre-tax synergies
of approximately ¿200 million, comprising 170 million in cost savings and 30 million of net revenue enhancements to be fully realised by 2005. The
majority of the cost savings will be derived by integrating the retail banking
businesses of the two companies. The cost savings represent around 15% of
Artesia BC"s 2000 operating costs. Revenue growth is expected in retail, asset
management and private banking, to be offset by some customer defections.
Total Restructuring charges are expected to amount to 250-300 million.
Mr Rik Branson, Chairman of the Arco-group said: "Arcofin, as
a large cooperative group, will become a core shareholder of a more powerful
group, which creates a stronger growth potential, a more diversified income
stream and a better profitability profile by using economies of scale and
Mr Pierre Richard, Chairman of the Executive Committee of Dexia
said "This combination is consistent with our announced strategy both for
growth and for the improvement of our efficiency ratios. This transaction
strengthens one of our three business lines - retail financial services in
Belgium as well as our pan-European franchise in private banking and asset
We will now be in an even stronger position to service our customers,
provide more and better opportunities for our employees and create more value
for our shareholders".
The merger integration planning process has been guided by six
· Value creation is central. The focus is on maximising synergies.
The processes of the merged bank will be based on best practices, independent
of their origin (Artesia BC, Dexia or external)
· The commercial power of the merged bank will be maximised,
using one single umbrella brand, differentiating the offer by client segment
and leveraging the power and the motivation of the self-employed agents
· Cost synergies are an important part of the objective, leading
to a full merger of the back offices, the support services and information
· The risk criteria of the Dexia Group will be applied to the
· The merger will be executed to limit risks with respect to
clients and employees
· The top management is committed to, and will continue to be
actively and intensively involved in, the preparation and execution of the
Retail Financial Services
The retail financial services network will operate under the
Dexia Bank brand.
The unique and highly efficient Dexia Bank franchisee system
will be maintained. Artesia BC branches will be integrated within the "star"
clusters of Dexia Bank"s local agency co-operative structure. Dexia Bank will
consider offering the branch managers of Artesia BC"s retail banking network,
Bacob, the opportunity to become self-employed agents, or to remain commercial
employees of the bank. Also, the agents of Artesia BC"s insurance business,
DVV(LAP), will enhance the retail bancassurance offering.
The most efficient integration of Dexia Insurance and DVV(LAP)
will be put in place. DVV( LAP) offers a range of life and non-life products
through banking, agency and third party distribution channels. DVV(LAP) "s
insurance products will find their place in the Dexia offering.
Private Banking and Asset Management
The private banking activities from Artesia BC in Belgium will
enhance Dexia Bank"s strategy in this area. The Dexia agents will be incentivised
to transfer high net worth clients to the private bank. The private banking
offering may operate under a different brand, underneath the overall Dexia
Bank umbrella brand.
In asset management, the investment teams of Cordius and Dexiam
Belgium will join forces. This is intended to result in better investment
performance, a broader range of products, shorter time to market for new products;
the integration of middle and back-offices will allow costs reduction.
The corporate banking teams will be integrated mainly in terms
of services provided to non-profit organisations. Artesia BC"s current strategy
of selective focus on family owned clients and non-profit organisations, with
a fee based product offering, will be continued. Asset quality and meeting
Dexia"s financial targets are of utmost importance.
In financial markets the respective teams will be integrated
in Dexia Financial Markets. One trading platform will be created for all Belgian
operations. Financial markets activities will be managed so as to apply the
current risk criteria of Dexia, and enhance Dexia"s sales capabilities.
Back Office and Support Functions
All banking and insurance back office and support functions
will be merged operationally. The decision on the target platform will be
made based on clear evaluations of efficiency and level of service.
PRO-FORMA SHAREHOLDER STRUCTURE OF DEXIA GROUP
Following the successful completion of the transaction, the
primary shareholders in the Dexia Group will be:
Arcofin is fully supportive of Dexia"s strategic plan and will remain a stable
core shareholder of the group. Arcofin is committed to its cooperative structure
and the payment of a stable dividend stream to its cooperative shareholders.
The transaction will be accounted for by Dexia using the purchase method. Goodwill
is expected to amount to ¿1.1 billion, assuming Artesia BC"s FRBG (¿466 million)
and a preliminary estimate of unrealised gains (¿200 million) are included in
Artesia BC"s equity base. The transaction is expected to have a neutral impact
on cash earnings per share in 2001 and a positive impact in 2002, while reported
EPS will be accretive from 2003.
Tier 1 ratio will be brought from 9.3% at December 31.12.00 down to 9.1% post
Implementation of the Transaction
Dexia and Arcofin have entered into an agreement dated 13 March, 2001 which
provides for the contribution by Arcofin of all of its shares in Artesia BC
(99.53% ownership) in exchange for the issuance of 17,893,463 million Dexia
shares. Following completion of the transaction, Dexia will have 115,441,698
ordinary shares outstanding. Artesia BC"s major shareholder, Arcofin, will have
a proforma ownership of 15.5% of the enlarged Dexia group.
The completion of the transaction is subject to approval from banking and insurance
regulatory authorities in the countries in which Dexia and Artesia BC operate,
approval from European competition authorities, final approvals of the agreement
regarding representation of Arcofin at the Board of Dexia., and satisfactory
completion of confirmatory due-diligence. The transaction is expected to close
by the end of June 2001
The boards of directors of Dexia, Arcofin and Artesia BC have unanimously approved
the terms of the transaction. Dexia has been advised by Morgan Stanley Dean
Witter. Arcofin and Artesia BC have been advised by Schroder Salomon Smith Barney.
COMBINED FINANCIAL INFORMATION
Key financial figures for the enlarged group at and for the year ended 31 December,
2000 are follows:
|Risk weighted assets
|Assets under management (Bn)
|Net profit (after minorities)
|Book value per share
|Tier 1 ratio (%)
|Total capital ratio (%)
1. Does not reflect differences, if any, in the accounting policies of Dexia
and ARTESIA BC. Includes the effect of the transaction but excludes the effects
2. Before goodwill amortisation
INFORMATION ABOUT DEXIA
Dexia is a European multi-specialist banking group : it is the global leader
in public finance, a European leader in investment management services, and
holds a strong franchise in Benelux retail banking. Dexia operates through 3
main subsidiaries: Crédit Local, which specialises in lending to local authorities
and public sector project finance, Dexia Bank, a Belgian bank active in retail
financial services and to a lesser extent in public finance; and Dexia - Banque
Internationale à Luxembourg, principally active in investment management services
(asset management, private banking and fund administration). In addition to
France, Belgium, the Netherlands and Luxembourg, the company has operations
throughout Europe, as well as offices in the Americas, Asia and Australia. As
at December 31, 2000, Dexia is rated Aa1 by Moody"s, AA+ by Fitch IBCA and AA
by S&P. Dexia is listed on the Brussels (part of the BEL 20), Paris (part of
the CAC 40) and Luxembourg Stock Exchanges and is included in the Euronext 100.
INFORMATION ABOUT ARCOFIN
Arcofin CVBA - a financial cooperative holding company - will become a core
shareholder of Dali. Arcofin has a total capital and reserves of 1.9 billion
at 31.12.2000. This financing capacity is provided by more than 800.000 individual
private shareholders. Next to Arcopar CVBA (which owns directly and indirectly
54 %) individual shareholders being Artesia BC"" personnel and customers (19,4
%) and Arcoplus CVBA (which owns directly and indirectly 10 %), the Social Christian
Movement (14,8 %) is the stable institutional shareholder within Arcofin CVBA.
INFORMATION ABOUT ARTESIA BC
The Group rests on three pillars, which are established players the Belgian
market: merchant bank and portfolio manager Artesia BC Bank, BACOB Bank for
the retail business and DVV insurance. Via Banque Artesia Nederland in the Netherlands,
Banque Vernes Artesia in France and Artesia Bank Luxembourg in the Grand Duchy
of Luxemburg, Artesia BC secures itself a very competitive position in the Benelux
and the peripheral countries. Artesia BC is also the reference shareholder of
the portfolio management company Cordius Asset Management, of Artesia Securities,
a stockbroking company specialising in small & mid caps and index-linked products,
and of specialist subsidiary companies dealing in leasing, renting and factoring.
The Group has also specialised subsidiaries or representative offices in Austria,
Denmark, Switzerland, Ireland and the United States. Artesia BC is rated A2
by Moody"s, A by S&P, A+ by Fitch IBCA. 99.53% of the capital of the public
limited company are held by the financial holding company Arcofin.