DZI has never been a name associated with a just a single service sector. It used to have a corporate halo while a household name in the pre-1989 times. It held onto its profile when, through a landmark privatisation deal, it came into the hands of Bulgarian businessman, Emil Kyulev. Under his ownership, it remained a corporation providing many services from a full suite of insurance services to banking services.
After Kyulevs murder in 2005, the divestiture strategy of his wife, Vesela Kyuleva, to sell the conglomerate in chunks, cast some doubt as to whether the DZI name would continue in sectors across the finance board.
Doubts were reinforced when the buyer of DZI Bank, EFG Eurobank Ergasias of Greece, announced in late spring it would finalise the merger of its two Bulgarian lending units before the end of the third quarter. After this, its lending assets, DZI Bank and Postbank, are to operate under the EFG Eurobank Bulgaria name.
One DZI trademark lost, hopes for DZIs survival resurfaced when the buyer of the insurer, Belgiums finance and insurance giant KBC, said it would keep the name of DZI Insurance. All the more, it said it would combine its first ever Bulgarian asset with a lending institution as well.
On September 9, a KBC spokesperson told wire agency SeeNews, on condition of anonymity, that the Belgian group had been in buyout talks with one of Bulgarias smaller banks. He did not name the targeted bank and neither did the source mention a potential price for the acquisition. More details on the deal would be made available once negotiations were completed, which the spokesperson said should be this year.
KBC is almost certain to finalise the acquisition and, thus, bring DZIs image to date, home yet again. The Belgian giant consistently operates in both the banking and insurance sectors, both at home and in its new markets.
At present, KBC is undergoing an aggressive expansion push. This year alone, it has purchased assets in Central and Eastern Europe for a total price of 1.4 billion euro. Since 2004, expansion focused on Bulgaria, Romania, Russia and Serbia. An acquisition of note is Absolut Bank of Russia as the local banking market is generally closed to foreign capital.
Thomson Financial News quoted KBC officials as saying the buying spree for the year was not over yet. The company was also looking at a Bulgarian bank and an insurer or lender in Serbia. These statements presumed DZI Insurance would not be KBCs only player in Bulgaria for long.
Yet KBCs concept presumes solo ownership, in each country it operates in and if regulations allow. In Bulgaria, the concept is due to materialise within months.
KBC completed the acquisition of 70 per cent of listed DZI Insurance in early August. By early September, it had already raised its stake to 81.21 per cent, a sufficient shareholding to resort to a mandatory buyout on the stock exchange.
On September 5, KBC opened a 28-day offer and DZIs minority shareholders were invited to sell their shares at 188.37 leva a share, a price equalling that paid by KBC on acquisition. The free float, less KBCs shareholding, was 18.79 per cent or 725 282 shares. This meant the total value of the tender offer amounted to 78.4 million leva.
Once KBC was the sole shareholder, DZI would be delisted from the Bulgarian Stock Exchange, provided it gets approval from the Financial Supervision Commission. If delisted, the market capitalisation of the Sofia Stock Exchange would decline by 727 million leva or 2.89 per cent of its value.
KBC said it was open to talks with the financial watchdog on retaining the public status of the company. Yet, no such talks have been reported so far.
Recently, KBC explained its delisting strategy by saying it wanted to be the only publicly traded entity within the group.
Besides, an international company tends to make a subsidiary private whenever it wants accelerate restructuring through faster decision making. Decisions in a listed company take more time because of time-consuming procedures such as convening a general shareholders assembly, waiting for approval from supervisory boards, etc.
On or off the exchange, KBC has struck one of its better deals with DZI. It bought a leader in both the general and life insurance markets. Also, it has made the purchase at a stage when the insurance market is set to boom.
The European Union accession and the single-passport procedure for companies registered within the EU is likely to lead to the entry of many big international giants, local market observers say. As a result, the insurance market will see its size increase as internationals come and bring new products to Bulgaria, create attractive insurance mixes, attract clients from elsewhere to operate in the country and create the need for insurance across the bulk of the population.
KBCs early entry puts it in a position to grab a large portion of the potential growth. Already this year, a company statement said, development should occur through focus on retail and SME (small and medium enterprises) services and adopting a segregated pricing structure. Attention will be paid to better distribution through the launch of on-line sales, call centres and the introduction of combined banking-insurance services.
Growth is a buzzword for a group whose development mainly stems from snapping on the right companies within a fast-growth segment. Given the groups activities abroad, it has not been ruled out that the Belgian giant may buy Bulgarian brokerages in the future.
This year alone, it bought seven brokerages in Central and Eastern Europe, among which were Romanias second-largest independent broker by assets, Swiss Capital, and Hungarys largest insurance broker, Equitas.
Buying one in Bulgaria would hardly be a surprise as KBC would, thus, be able to offer all services within its area of core competence. Next to the banking and insurance services, the group offers asset management, corporate and brokerage services.
The expansion to date has boosted KBCs market capitalisation to 2.25 billion euro.
KBC Group is the second-largest player on the Belgian finance and insurance market. The group ended the fiscal year 2005 with 11.5 billion euro in premiums and 2.25 billion euro in net profit.
