Kvika signs contract to acquire GAMMA

Monday 19. nóvember 2018
Ármann Þorvaldsson

Kvika Banki hf. (“Kvika”) and the shareholders of GAMMA Capital Management hf. (“GAMMA”) have signed a contract for the acquisition and sale of the entire share capital of GAMMA. The transaction is subject to regulatory approval and the approval of the shareholders’ meeting of Kvika. The change in ownership creates even more opportunities in the operations of GAMMA, which after the acquisition will become a subsidiary of Kvika. Kvika’s objective with this acquisition is to further strengthen the bank in the field of asset and fund management.

The purchase price for the entire outstanding share capital of the company amounts to ISK 2,891 million, taking into account the accrued performance-related fees which remain to be recognised at GAMMA. GAMMA’s equity at the end of June 2018 amounted to ISK 2,084 million.

On the basis of the book value of performance-related fees at the end of June 2018, the purchase price amounts to ISK 2,406 million and is divided as follows:

  1. Cash amounting to ISK 839 million which is paid at the conclusion of the transaction.
  2. UCITS in GAMMA funds amounting to a total of ISK 535 million.
  3. Performance-linked payments, estimated at ISK 1,032 million on the basis of GAMMA’s position at the end of June 2018 and to be paid when long-term claims on GAMMA funds have been collected.

GAMMA shareholders will moreover be entitled to extra payments for performance-related fees from the company's real estate fund. The purchase price of GAMMA could also upwardly or downwardly change in accordance with how the operations and value of GAMMA’s assets develop over the coming quarters.

The bank’s revenue before tax is expected to increase by ISK 300-400 million a year, following the acquisition. There is not expected to be a need to increase the share capital of Kvika due to the acquisition. The premium in the transaction is determined by GAMMA’s position at the time of the transaction, estimated at ISK 850 million.

Valdimar Ármann, CEO of GAMMA:

“The sale strengthens GAMMA, which from now on will offer its customers even more diversified financial services and a broader range of products. GAMMA’s performance over the past decade has been significant for its customers, staff and shareholders alike. The company is one of the most sucessful fund management company in the country and offers a broad selection of funds which amount to ISK 140 billion. At GAMMA we look back with pride and look to the future with optimism.”

Gísli Hauksson, one of the founders of GAMMA and the biggest owner of the company:

“A long process is now coming to an end with Kvika’s acquisition of all of GAMMA’s share capital. For the shareholders of GAMMA, a great opportunity lies in the purchase price being partly paid in units in the company’s funds, in addition to the fact that shareholders will benefit from the continued good management of the funds. For GAMMA’s customers, the company’s services will greatly increase with Kvika’s ownership. Among other things, the company will be poised to provide even more effective services overseas. Over the past years, GAMMA’s personnel have done a unique job in securing outstanding returns for their customers and in increasing the assets under management and I am convinced that this will continue. I congratulate Kvika on this acquisition.”

Ármann Thorvaldsson, CEO of Kvika:

“The acquisition of GAMMA significantly bolsters Kvika’s asset and fund management and substantially increases the bank’s expected returns. The goal is to merge the operations of the companies in London, which will reinforce the foundations of the bank’s international operations. GAMMA’s staff have achieved remarkable results in fund management in recent years and it is a great catch for Kvika to be joined by such a capable team.”

GAMMA is one of the most sucessful fund management companies in the country and celebrated its tenth anniversary this year. GAMMA offers a broad selection of funds for investors and the public. GAMMA’s funds are among the largest corporate bond funds in Iceland and the biggest investors in the Icelandic property market. The funds also invest in equity, treasury bonds, deposits and more.

Kvika is a specialised bank and a leader in asset management and investment banking services. The combined assets under the management at Kvika and management companies owned by the bank will amount to ISK 400 billion, if the acquisition of GAMMA finalizes.