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Merger Bunadarbanki and Kaupthing 120403

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Merger Bunadarbanki and Kaupthing 120403 Reykjavík, 12 April 2003 Joint press release from the Boards of Directors of Búnadarbanki Íslands hf. and Kaupthing Bank hf. Merger between Búnadarbanki Íslands and Kaupthing Bank The Boards of Directors of Búnadarbanki Íslands hf. and Kaupthing Bank hf. have agreed to propose at shareholders’ meetings in the banks that the companies be merged. The proposed name of the merged bank is Kaupthing Bunadarbanki. A ratio of exchange has been decided whereby shareholders in Kaupthing Bank hf. receive approximately 51.77% in the merged bank and shareholders in Búnadarbanki Íslands receive approximately 48.23%. The bank will be listed on the Iceland Stock Exchange and on Stockholmsbörsen in Sweden. Kaupthing Bunadarbanki will comprise two powerful banks which both enjoy strong market positions in Iceland. The merged bank will be by far the largest bank in Iceland and a leading player in almost all areas of the Icelandic financial market. Kaupthing Bunadarbanki will be the highest-valued listed company on the Iceland Stock Exchange and amongst the ten largest banks in the Nordic countries. The merger will create a powerful financial company and bank providing all-round services in the fields of commercial and investment banking. The bank will operate a total of 36 branches throughout Iceland which will work under the name of Búnadarbanki. It is the intention to considerably strengthen the bank’s commercial banking operations in the near future and the scope of these activities is expected to grow. However, streamlining measures will be taken in those areas of operations where Búnadarbanki Íslands hf. and Kaupthing Bank hf. overlap. Arguments in favour of the merger The Boards of Directors of Búnadarbanki Íslands hf. and Kaupthing Bank hf. believe that the merger of the banks will increase shareholder value and ensure improved and more comprehensive services for the customer. The merged bank will be able to achieve greater efficiency in operations and operation-related investments, reduce the cost of capital and utilize economy of scale in numerous other ways. The merged bank can also provide its diverse group of customers with internationally competitive solutions in all areas of financial services. Competition within the banking services sector is continually increasing. The merger of Búnadarbanki Íslands hf. and Kaupthing Bank hf. is a logical continuation of the series of mergers and transformations which has occurred on the Icelandic and international financial markets in recent years. The growth and globalisation of companies require increasingly large and powerful banks to provide specialised services and comprehensive solutions. The merger between Búnadarbanki Íslands hf. and Kaupthing Bank hf. is designed to meet these demands. The merged bank will furthermore be in a stronger position to attract and retain qualified employees, thus forming the solid team which is essential for positive results and success. The banks currently employ a dynamic group of experts who are leaders in their fields both in Iceland and overseas. The merger will create further opportunities for the employees of the merged bank to utilize their expertise for the benefit of the bank’s customers. Market position of Kaupthing Búnadarbanki The operations of Búnadarbanki Íslands hf. and Kaupthing Bank hf. are well suited to each other. Both banks have demonstrated considerable growth in recent years and both posted record profits last year. The merged bank will occupy a strong market position in all investment banking activities and will enjoy a solid market share in commercial banking in Iceland. The bank will hold a strong position in asset management and securities custody in Iceland. Both Búnadarbanki Íslands hf. and Kaupthing Bank hf. have operations in Luxembourg and it is intended to merge these. The increased financial strength of the bank provides opportunities for further takeovers and mergers with banks and financial institutions outside Iceland, and the aim of Kaupthing Búnadarbanki is to develop activities abroad and to become one of the leading investment banks in the Nordic countries. Share capital The ratio of exchange has been based on the market price of shares in both banks, as well as the financial position, results, market position and future prospects. The annual accounts of the banks and other information on their profit and loss accounts and balance sheets have also been taken into consideration. The Boards of Directors of Búnadarbanki Íslands hf. and Kaupthing Bank hf. have reached an agreement on the following ratio of exchange between the banks: The total share capital in each bank is assessed in such a way that shareholders in Búnadarbanki Íslands hf. receive approximately 48.23% of the share capital in the merged bank and shareholders in Kaupthing Bank hf. approximately 51.77%. Share capital in the merged bank will be ISK 4,155,000,000 at nominal value or 415,500,000 shares. Shareholders in Búnadarbanki Íslands hf. will receive 0.0369863 shares in Kaupthing Bunadarbanki for each share in Búnadarbanki Íslands hf. or a total of up to 200,425,000 shares in Kaupthing Bunadarbanki. The address of the merged bank will be at Austurstræti 5, Reykjavík. The banks will be merged under the ID-No. of Kaupthing Bank. This is because Kaupthing Bank has recently been listed on Stockholmsbörsen and it is important to maintain this listing without any particular discontinuance. Aims of the merged bank · To maximise the bank’s value and long-term shareholder value. · To be a leading all-round bank in Iceland and one of the main investment banks in the Nordic countries. · To maintain rapid growth without reducing demands on profitability. · To develop a positive image as a progressive and independent all-round bank. · To develop and maintain dependable long-term relationships with its customers. · To employ motivated, well-educated and enterprising staff who are experts in their respective fields. · To continue to develop the bank’s workforce as its most valuable resource. · To utilize the most up-to-date information technology in order to improve the bank’s competitiveness. Size and financial strength The merged bank will be the largest company listed on the Iceland Stock Exchange and will have higher shareholders’ equity than any other listed company. · The combined market capitalization of the banks is ISK 61.7 billion based on the price at the close of trading in equities on 28 March 2003. · The combined shareholders’ equity as of year-end 2002 is ISK 33.5 billion and total assets amount to ISK 434 billion. · The banks posted a combined net profit of approximately ISK 5.4 billion last year and return on equity was 24.3%. · The banks’ combined operating income amounted to approximately ISK 21.4 billion. Financial summary of the annual accounts in 2002 (amounts in ISK millions) Kaupthing Búnadarbanki Total Bank Íslands Profit and loss Net operating income 9,910 11,502 21,412 Other operating expenses 5,951 6,535 12,486 Pre-tax profit 3,377 2,755 6,132 Net profit 3,075 2,288 5,363 Operating expenses/op. income 60.0% 56.8% 58.3% Return on equity 32.4% 18.2% 24.3% Balance sheet Cash, treasury bills and 20,494 19,427 39,921 amounts due from cred. inst. Loans to customers 82,453 186,880 269,333 Bonds and shares in other companies 72,494 33,348 105,842 Other assets 12,562 6,290 18,852 Shareholders’ equity 18,322 15,192 33,514 Total assets 188,003 245,945 433,948 Board of Directors, Chief Executive Officers and organisation The Boards of Directors of Búnadarbanki Íslands and Kaupthing Bank will propose at shareholders’ meetings in the banks that the Board of Directors of the merged bank will comprise nine members. It is proposed that the Working Chairman of the Board of Directors will be Sigurdur Einarsson, that the Vice-Chairman of the Board of Directors will be Hjörleifur Jakobsson and that the Chief Executive Officers of the merged bank will be Hreidar Már Sigurdsson and Solon R. Sigurdsson. Preconditions and due diligence It is a precondition for this merger that shareholders’ meetings in Búnadarbanki Íslands hf. and Kaupthing Bank approve the merger schedule of the banks which the Boards of Directors have agreed upon. It is also a precondition for the merger that the Financial Supervisory Authority approve the merger and the Competition Council does not invalidate the merger. The approval of the Financial Supervisory Authority for the merger has been requested and the Competition Authority has been informed of the proposed merger. Parties to the agreement agree that a due diligence shall be performed on the banks following the signing of this merger schedule. The due diligence shall be co-ordinated by both banks by competent parties approved by both banks, who shall examine the assets and liabilities of both banks and off balance sheet agreements. It is the intention that this due diligence be available no later than 28 April 2003. Key dates · An agreement on the merger and a merger schedule approved by the Boards of Directors of Búnadarbanki Íslands and Kaupthing Bank, 12 April. · Shareholders’ meetings in both companies held before the end of May. · The first day of operations of the merged bank intended to be 30 May but this depends on the position of the Icelandic supervisory authorities towards the merger. For further information please contact Hjörleifur Jakobsson (tel: + 354 660 3340) Chairman of the Board of Directors of Búnadarbanki Íslands hf. and Sigurdur Einarsson (tel: +354 860 1560) Chairman of the Board of Directors of Kaupthing Bank. .
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