Key events

Ø  17 September 1996 – the Czech National Bank (CNB) placed Agrobanka under administration

Ø  1998 – under the restructuring and privatisation process the ‘healthy part’ of Agrobanka was sold to GE Capital Bank; Agrobanka’s profitable core banking activities were sold to a strategic private investor, namely the GE group, via a tender procedure. Despite the favourable terms the other 15 potential buyers withdrew from the tender (the tender documentation for the sale of the profitable part of Agrobanka did not include any commitment to provide State aid, and in consequence GE was the only interested party remaining; the tender was not transparent)

Ø  22 June 1998 – under the purchase agreement between Agrobanka and GE Capital Bank, GE acquired Agrobanka’s profitable assets for EUR 11 million; GE received a EUR 730.3 million capital injection from the CNB and state guarantees of 4.670 billion, together with a purchase put option

(GE acquired Agrobanka’s fully functional infrastructure, branch network, clients, information system and employees, and GE was given exceptionally favourable business terms for the purchase of part of Agrobanka)

Ø  From the start there were serious doubts about the validity of the purchase agreement on the sale of part of Agrobanka to GE, raised not only by the public and Agrobanka’s shareholders but also by the courts, which refused to register the sale of part of Agrobanka under this purchase agreement in the Commercial Register on the grounds that the purchase agreement had serious legal shortcomings. The transaction has not been registered in the Commercial Register to date.

Ø  1999 – one year later – Agrobanka’s net profit as part of GE was EUR 36.3 million

Ø  1999-2015 – as part of GE, Agrobanka generates a profit of at least EUR 37 million each year – it is clear that Agrobanka was sold to GE at a very low price and there was no need to give GE the CNB’s capital injection and the guarantees from the state in order for Agrobanka to operate normally, and this therefore constituted unlawful public aid

Ø  2007-2011 – settlement agreements were concluded, under which GE was to provide compensation for Agrobanka’s shareholders on condition that neither the liquidator, nor members of the executive board, nor the shareholders would sue GE on the grounds that the purchase agreement was invalid. Shareholders had to undertake not to exercise their rights as shareholders in any way and not to take any steps that would challenge the 1998 purchase agreement, the registering of part of the company in the Commercial Register and the placing of Agrobanka under administration, or would obstruct the winding-up of Agrobanka. GE undertook to pay shareholders who signed these agreements a figure corresponding to 15 % of the nominal value of their Agrobanka shares, so the concluding of these settlement agreements was significantly detrimental to Agrobanka.

Ø  18 July 2007 – the European Commission’s decision on the privatisation of Agrobanka, evaluating whether the capital injection and the guarantees constituted State aid, and whether this State aid was compatible with the internal market – the Commission only evaluated part of the guarantees provided to GE, and the put option, and according to the Commission’s decision this was State aid compatible with the internal market; the Commission considered the remaining part of the guarantees provided and the EUR 730.3 million capital injection to be irrelevant on the grounds that they were not applicable after the Czech Republic’s accession to the European Union (having expired by the time the Czech Republic joined the EU)

Ø  2015 – GE paid out the EUR 730.3 million capital injection in the form of dividends – this figure is identical to the capital injection GE received in 1998, proving that GE had retained the EUR 730.3 million capital injection in Agrobanka so that it could later pay it out in the form of dividends; the Commission’s decision in 2007 was based on incorrect and incomplete information – the Commission should assess whether the EUR 730.3 million capital injection was unlawful public aid, as its timing applies to the period after the Czech Republic joined the European Union

Ø  May 2016 – shares in GE/MONETA are floated on the stock exchange (IPO) – selling these shares generates an additional profit of as much as EUR 1,6 billion

Ø  Selling Agrobanka’s profitable activities to GE under the conditions set out above greatly harmed Agrobanka’s shareholders – of whom there were 6 800 in total, mostly small investors and former agricultural cooperatives – and Agrobanka itself, as this step definitively sealed its winding-up and it lost considerable assets. In contrast, for GE this action represented an exceptionally favourable purchase, and the provision of State aid of EUR 36.3 million and the guarantees gave GE a substantial advantage over its competitors on the market.

Ø  2017 – Agrobanka is still in the process of being wound up, and its shareholders are waiting for the liquidation proceeds to be paid – it is expected that shareholders will receive liquidation proceeds amounting to approximately 5.4 % of the nominal value of their shares

 

 

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Profitability between 1999 and 2015 – after 1999 Agrobanka, as part of GE, generated annual profits of approximately EUR 36.3 million – Agrobanka’s high profits of EUR 37 million or more in 1999-2015 as part of GE show that the CNB did not need to give GE the approx. EUR 730.3 million capital injection in connection with its purchase of Agrobanka’s profitable assets. Subsequently GE paid out this EUR 730.3 million capital injection in the form of dividends. This may be a case of unlawful public aid.