Green light from the Commission in the National Insurance-CVC deal

Of Leonida Stergiou

Finally, it seems that it enters the serial of the sale of National Insurance by the National Bank, which had started in 2016 to reach an agreement with CVC Partners in March 2021 and to be delayed again, following a complaint to DGCom for unfair competition.

The news confirms a post by Capital.gr, which had stated that the green light is expected until the end of February.

Unofficial information from Brussels confirmed by sources aware of the developments, the competition management DGCom gave the green light to the completion of the acquisition of 90.01% of National Insurance by the American capital CVC Partners.

The benefit of the EIB

With this decision, the process for the completion of the transaction and the payment of the shares to the National Bank begins, which maintains a share in the insurance, 15-year agreement, sales revenues and capital increase by 60 basis points. The process is expected to be completed within two months, with the administrative changes in National Insurance to follow.

Sale process and price

The agreement, which has already been approved by the general assembly and the competent authorities, provides for a nominal price of 505 million euros for 100% of the insurance company.

Part of the price, up to 120 million euros, is linked to achieving specific goals of selling bank insurance products by 2026. The agreement includes a 15-year agreement for the sale of bank insurance products, with the right of extension.

The sale process is as follows:

● Disinvestment of 90.01% of the participation of the National Bank in the share capital of National Insurance through the sale and transfer of all the shares of National Insurance belonging to the Bank to the newly established subsidiary of CVC, Ethniki Holdings S.O.rl and the market by the Bank at a rate of 9.99% in the share capital of Ethniki Holdings.

Τμήμα A portion of the price amounts to EUR 385 million (unconditional purchase price), which is subject to adjustments. Specifically, of this, the amount of 125 million euros is subject to adjustments, which will be paid five years after the completion of the transaction. The initial part is subject to adjustment in case either the amount of Eligible Equity or the Capital Adequacy Ratio at the end of the sale is lower than agreed in accordance with the objectives, based on the Business Plan of National Insurance.

Τμήμα Another part of the conditional price (“earn-out”) amounts to the amount of 120 million. This is conditional on the achievement of specific performance targets from the sale of bank insurance products by the Bank from 2022 to 2026 ( with the last 30 million being subject to the return that CVC funds will have achieved the return they aim with their investment).

● Are there safeguards for the National in case the CVC disinvests early

. Upon completion of the Transaction, the Bank will hold 9.99% of the share capital of Ethniki Holdings.

First attempt

After the deadlocked sale attempt in 2016-2018, Ethniki requested and received an extension for the implementation of the Restructuring Plan until 31.12.20, so as not to make hasty decisions for the sale of the company.

In the fall of 2019, the sale process began again. Only one binding offer was submitted, that of CVC Capital, in March 2020. Negotiations with CVC lasted almost 1 year, until the golden section was found that was satisfactory for the bank.

They initially froze due to the start of the pandemic, but then CVC, confirming its interest in the company, returned with a renewed offer in the fall of 2020.

For six months after that, the team that was running the transaction in the National, together with the consultants and the management, had successive discussions with the CVC, in order to close all the open issues for negotiation. At the same time, discussions took place at the level of the BoD, HFSF and supervisory authorities (BoG, ECB, DGComp).

The agreement and the termination

In April 2021, the plan for the sale of National Insurance is approved by the shareholders of the NBG, with the aim of starting the sale process in the fall and being completed by the end of the same year.

However, a complaint from a private hospital and a competition insurance company forced DGCom to reopen the case and reconsider the case. The contacts of DGCom, CVC and National Insurance with the necessary explanations were practically completed by Christmas but the process was formally completed in January.

The complaint was related to CVC’s large share in private health care, which could lead to competition issues with favorable pricing in favor of National Insurance, which it acquires.

The rationale for green light

The main argument of the National Insurance and the CVC is that the American capital has no interest in operating preferentially with the insurance company because this jeopardizes the turnover and profitability of the private hospitals in which it also participates.

Also, if there is price misconduct between National Insurance and CVC private hospitals, then the easiest way for the competition to find out is to terminate it and cancel agreements with the hospitals. That is, unprofitable for CVC and National Insurance.

Moreover, CVC, through National Insurance, holds a smaller share in the insurance market than in the private health sector through the hospitals in which it participates. Therefore, it can not operate at the expense of its core business.