Just few days after my writeup on Nordfyns Bank, another bank has entered the ring. SJF Bank, previously majority shareholder with 25% of the shares, has sold its entire stake to the smaller regional peer, Middelfart Sparekasse, at the price of… DKK510/share, 9% above last week’s share price.
Middelfart Sparekasse, a non-listed, self-owned institution (i.e. no shareholders), is more than twice the size of the previous merger candidate Fynske Bank. And today, Middelfart Sparekasse issued a press release announcing their goal of a merger:
“These two banks have a unique opportunity to strengthen their position together. A combined institution will hold a solid position on Fyn, and though we’re talking about a bank and a savings bank, Nordfyns Bank and Middelfart Sparekasse are run on very similar principles. Presence is one of Nordfyns Bank’s three core values, and Middelfart Sparekasse’s new strategy bears the title “Denmark’s most present bank”. The local roots and local support are also important for both”.
With an intrinsic value higher than the block trade price of DKK510/share, a merger closure could squeeze something at or above that neighborhood. Let’s see if Fynske Bank will stay in the picture. Today, Nordfyns Bank is trading at DKK490/share.
Oddly, SJF Bank, the seller, had previously expressed interest in a merger through a letter dated November 6, 2024. This contradicts Nordfyns Bank’s statement during the collapsed merger talks with Fynske Bank, claiming it was “exclusively in dialogue with Fynske Bank about a possible merger and, as part of the merger process, has not identified interest from other parties in an alternative transaction.” The incentives here are derailed. Luckily, Nordfyns Bank management has no choice but to abide by the shareholders, its owners, now.
While this “risk arb” is unfolding pretty quickly, I’m still eyeing another Danish bank with a remarkably similar setup that’s the best opportunity to play the Danish bank consolidation story. This is a better bank with less competition, trading at a substantial discount. For this bank to approach the book multiple of Nordfyns Bank, it would have to rerate by >50%, and that’s without counting the share of synergies in a merger. Better yet, this bank and Nordfyns Bank have something important in common in the cap table. Keep an eye on my writeup later in the week (this one behind the paywall).