Apollo Global Management, LLC (APO) is in discussion with distressed Portuguese bank Banco Espirito Santo (BES) to buy the latter’s insurance unit – Tranquilidade. Apollo is expected to shell out around €200 million ($264.6 million) for this acquisition.
Though the acquisition deal has not yet been confirmed by Apollo, the agreement is likely to be finalized in the coming two weeks as divulged by people familiar with the matter. Further, the deal will need approval of the Portuguese Insurance Institute.
Of the anticipated €200 million payment by Apollo, €140 million will be passed on to Tranquilidade, which is in ardent need of capital to bolster losses caused by BES’ fallout earlier this year.
The remaining amount will be paid to Novo Banco, the now legal owner of Tranquilidade and the “good bank” created after splitting up BES. Before BES’ crisis, Tranquilidade was one of the biggest providers of home and car insurance services in Portugal and was part of the Espirito Santo Financial Group, a family holding company.
BES, one of the biggest banks in Portugal, incurred a loss of €3.58 billion in the first half of 2014 – the biggest loss in Portuguese banking history. The bank was bailed out and segregated into a “good bank” and a “bad bank” under the multi-billion euro state rescue plan being hashed out by Lisbon and EU authorities.
European banks have been compelled to sell assets and undergo restructuring to comply with regulations in lieu of the financial crisis. The setback of the European banking sector has attracted the attention of many private equity and hedge funds that specialize in turning around the distressed assets.
Akin to this, Apollo has been vying for opportunities to diversify its investments as well as expand its footprint in Europe. Even before the troubles of BES and the Espirito Santo family were exposed, Apollo had shown interest in buying Tranquilidade.
Moreover, the New York-based investment manager completed the acquisition of 85% stake in Altamira – Banco Santander, S.A.’s (SAN) real-estate servicing unit for €664 million in Jan 2014. Also, the company had acquired Brit Insurance in 2011 in partnership with CVC Capital Partners.
Currently, Apollo carries a Zacks Rank #3 (Hold). Some better-ranked finance stocks include Cohen & Steers Inc. (CNS) and AllianceBernstein Holding L.P. (AB). Both these stocks hold a Zacks Rank #1 (Strong Buy).
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