Lone Star negotiating with BPCE and CaixaBank as it prepares IPO

The US equity fund Lone Star is anxious to resolve the sale or floatation of Novobanco as quickly as possible and is negotiating its possible sale as well as proceeding with preparations for a stock market floatation at the same time.

According to Journal Económico Lone Star wants to speed up the bank’s sale as quickly as possible so that it can reinvest the proceeds in other projects.

That said, the scenario of an IPO (Initial Public Offering), i.e. listing on the stock exchange with the sale of up to 30% of the capital, is still on the table, but it is clearly no longer the only scenario since Lone Star is seriously considering a direct sale to France’s BPCE Group (owner of Natixis) and CaixaBank.

In a direct sale scenario, the State has ensured that its stake will be sold at the same price as Lone Star (tag along mechanism), but the largest shareholder (Lone Star – 75%) may also force the State (Directorate-General of Treasury and Finance) and the Resolution Fund to sell their positions (drag along mechanism).

In banking and finance, a tag-along mechanism (also known as a co-sale right) is a contractual provision that protects minority shareholders by allowing them to participate in a sale of a company’s shares by the majority shareholder. Essentially, it ensures that minority shareholders can sell their shares alongside the majority shareholder, often on the same terms and conditions.

But In the context of banking and corporate law, a drag-along mechanism, also known as “come along” or “bring along” rights, allows a majority shareholder to force minority shareholders to sell their shares in a company if the majority agrees to sell. This mechanism is crucial for streamlining sales, as it prevents minority shareholders from blocking a sale if a majority of shareholders have agreed to sell their shares.

The State is not obliged to float its share in an IPO but has stated that it will have the same conditions as the other two shareholders if it decides to take part in the operation, including the terms of the sale price. However, under a direct sale, the situation is different.

In this case, without an IPO, and if the government is not in a position of total control (in parliament) there is the risk that the majority shareholder can sell the whole bank lock, stock, and barrel to an overseas bank, a situation that Portugal’s Minister of Finances, Joaquim Miranda Sarmento has warned about several times.

Joaquim Miranda Sarmento spoke out on Wednesday against the growing presence of Spanish banks in the country and stressed that the excessive concentration of the market in banks from a single country was undesirable.

However, he said nothing about the BPCE Group (owner of Natixis). Banque Populaire Caisse d’Epargne is a major French banking group formed by the merger in 2009 of two large retail banks, Groupe Caisse d’Épargne and Groupe Banque Populaire.

Spain’s CaixaBank is planning to a make a bid for Novobanco despite objections from the government and is preparing a bid of over €3Bn.

In the meantime, State-owned bank Caixa Geral de Depósitos is still weighing up acquiring Novobanco “alone out with a partner” which would mean splitting the bank’s assets in which case the bank would cease to exist as an independent bank.

However, Paulo Macedo, CEO of CGD, has already said that CGD could not have a 40% market share, because the Competition Authority would not allow it, but he is interested in corporate banking, where CGD has a low market share.

However, the CEO of CGD acknowledged that the separation of Novobanco would be “very complex”.