Freedom Holding Corp. announced its acquisition of Kassa Nova Bank JSC, which is part of Forte Bank JSC. The purchase will be made through Freedom Finance JSC.
Both sides are waiting for the deal to be approved by the Committee on Regulation of Natural Monopolies, Protection of Competition and Consumer Rights of the Ministry of National Economy and by the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan.
Upon completion of the transaction, the Kassa Nova bank will become a subsidiary of Freedom Finance JSC. The prerequisites for closing the deal are expected to be met by the end of the year.
According to the information published on the US Securities and Exchange Commission (SEC) website, Freedom Holding Corp. will acquire 9.3 million common shares of Kassa Nova Bank JSC. The purchase sum will consist of the bank’s equity capital as of June 30, 2020 in the amount of 17.3 billion tenge ($41.4 million) minus 1.7 billion tenge ($4.094 million), multiplied by 1.1. Thus, the purchase sum will amount to approximately $41 million.
It should be noted that, according to the deal's terms, the final transaction sum will be adjusted based on the difference between the net book value of the loan pool and the bona fide selling price of the loan pool. It will also be adjusted based on the difference between the net book value and the bona fide selling price of the bank's non-core assets and real estate.
According to Timur Turlov, head of Freedom Holding Corp., the company has already made a down payment of $4.3 million. The remaining sum will be paid after the deal is closed.
Freedom Holding Corp. will also acquire 1 million preferred shares from the owner of Forte Bank, Bulat Utemuratov, for $2.4 million.
Freedom Holding Corp. expects that the acquisition of Kassa Nova will improve its ability to provide financial services in Kazakhstan. Freedom Finance JSC is currently managing 16 retail brokerage firms in the country.
“The acquisition of the bank is a continuation of our company’s successful strategy, first implemented in Russia.There, the company carries out securities brokerage through Freedom Finance Ltd in combination with targeted banking services provided by FFIN Bank Ltd, in order to deliver a wide range of services to the clients,” the announcement by Freedom Holding Corp. reads.
As Timur Turlov said, the newly acquired bank will primarily operate as an investment bank.
"We understand that there is a huge space for work here, and we are confident that getting the opportunity to work with a banking license will allow us to contribute much more in the development of the securities market in Kazakhstan. It will also allow us to make the stock market fulfill its key role even more actively, which is to raise capital for our economy," said Turlov at a press conference on Tuesday, August 4.
The long-term goal of the holding is to build one of the best custodial services for Kazakhstani brokerage companies.
"We believe that, among other things, thanks to the emergence of a bank that may acquire a custodian license in the future, we could ensure reliable securities storage, at the same time providing high efficiency, direct stock exchange access and competitive transaction pricing. Thus, any professional participant in the Kazakhstani market would be on par with British or American companies here," commented Turlov.
As a reminder, custodial services include services for storage and management of the client's property on the basis of the client's order in writing. "Property" most often means securities, financial instruments and cash.
The Kassa Nova Bank was established in 2009 and currently has nine branches throughout Kazakhstan. Common shares of the bank are owned by the Kazakhstani Forte Bank JSC, and its preferred shares are owned by Forte Bank’s owner, Bulat Utemuratov.
Freedom Holding Corp. is a holding company that carries out financial operations, retail brokerage operations, investmentcounseling, securities trading, investment banking and underwriting services through its Freedom Finance subsidiaries.
The company is a professional participantin the Kazakhstan Stock Exchange (KASE), Astana International Exchange (AIX), Moscow Exchange (MOEX), Saint-Petersburg Exchange (SPB), Uzbekistan Stock Exchange Toshkent (UZSE), and Ukrainian Exchange. The company is headquartered in Almaty, and has administrative offices in Russia and the US. The company has branches in Kazakhstan, Russia, Kyrgyzstan, Ukraine, Uzbekistan, Germany and Cyprus. The holding’s common shares are traded on the Nasdaq Capital market, the KASE and the SPB.