The strategic pact and virtual merger between Bank Sarasin’s and Rabobank seems bound to end in divorce, according to industry analysts.
In a media interview last month, Sarasin chief executive Joachim Straehle signalled a possible separation when he said Sarasin would favour a management buyout (MBO) if Rabobank ever put its stake in Sarasin up for sale.
In the event of an agreement, Straehle said he was confident of securing funding for a deal from potential financiers in the Middle East, Asia and Switzerland.
“Rabobank has been a very supportive shareholder, but now they are increasingly focused on their core business,” he added in the interview.
Rabobank issued a swift rebuttal, stating a sale was “not on the agenda”.
Analysts say that a divorce with Rabobank is virtually inevitable given the prominence of the Sarasin signal that it wants to win back its independence.
Rabobank has its roots in the agricultural financial business and is not a logical partner for Sarasin, although its strong AAA credit rating has proved invaluable to the Swiss bank during the 2008 credit crisis and the widespread concerns about banking stability.
Vontobel banking analyst Teresa Nielsen considers the synergies between Rabobank and Sarasin to be rather low and “in our view a separation of the two would not be an issue”.
At Keefe, Bruyette & Woods, analyst Matthew Clark now sees “an elevated probability of some form of corporate action”.
A prospective deal with Baer, Clark suspects, would likely serve as a “benchmarking exercise” for Rabobank when evaluating any MBO proposal.
In an actual merger scenario with Baer, Clark said there would be a very high geographic overlap between the two Swiss banks, which should allow for “material value creation” from any such merger.
Clark estimates cost synergies at 30-50% of Sarasin’s cost base could drive 14-24% value accretion for the combined entity.
The buyout itself could total up to an estimated CHF3bn ($3.5bn), based on current market capitalisation and Sarasin’s success in surmounting regulatory pressure on Swiss private banking. Last year its asset under management rose above CHF100bn.
In addition, exploratory talks on some form of deal centred on Rabobank’s interest have reportedly taken place with Bank Julius Baer. Rabobank currently owns 46% of the Sarasin capital but controls 69% of voting rights.
Under Swiss takeover law, any acquiring group would be generally obliged to make a takeover offer to all shareholders once its interest crosses the 33.3% ownership threshold.
The minimum offer price is the listed share price ($45 at time of printing) and may not be less than 75% of the highest price at which the offering party acquired shares in the prior 12 months.
If Sarasin and Baer concluded a full merger, the combined bank would have an impressive CHF273bn of assets under management – give them greater clout in challenging their big Swiss rivals of Credit Suisse and UBS.