Eurobank, Greece's third largest lender, has purchased a majority stake in real estate company Grivalia in a deal valued at 780 million euros, the two companies said on Monday.
In an all share aquisition, the deal aims at strengthening Eurobank's capital base and reducing its massive pile of bad loans. Eurobank is offering 15.8 shares for each Grivalia share.
"The merger creates the best capitalized bank in Greece, with total capital ratio at 19%, ready to serve its clients, return to growth and support economic activity in Greece and Southeastern Europe," said they said in a joint announcement.
Canada's Fairfax Financial Holdings, which holds 18.23 percent of Eurobank and 51.43 percent of Grivalia, will become the largest shareholder in the merged entity with a 32.93 percent stake.
At the same time, Eurobank will accelerate plans to reduce non perfoming loans by offloading them onto a special purpose vehicle. Some seven billion euros worth of bank loans will be securitized and passed onto this SPV. This will allow Eurobank to reduce its bad loan ratio to some 15 percent of total loans, two years ahead of schedule from 30 percent currently.