Kvika banki hf.: Merger of Kvika, TM and Lykill

March 30, 2021 1:00 PM EDT

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Today, 30 March 2021, a meeting of the shareholders of Kvika banki hf. (“Kvika”), TM hf. (“TM”) and Lykill Fjármögnun hf. (“Lykill”) agreed to merge the three companies under the name and ID number of Kvika so that TM and Lykill shall be dissolved without settlement of debts and the companies shall be completely merged (merger with take-over), pursuant to Art. 119 of Act no. 2/1995 on Public Limited Companies.   

According to the merger schedule of the companies, dated 23 February 2021, the rights and obligations of TM and Lykill shall, in terms of accounting, be terminated on 1 January 2021 and Kvika shall take over all of the rights and obligations of TM and Lykill from that date onwards, including the TM and Lykill bond series. This includes the following bonds listed on the Icelandic Stock Exchange today: TM 15 1, LYKILL 16 1, LYKILL 17 1, LYKILL 21 04, LYKILL 23 09, LYKILL 23 11, LYKILL 24 06, LYKILL 26 05, LYKILL 210615, LYKILL 210915. Kvika has requested to be listed as the issuer of the above bonds.

With the merger, shareholders in TM shall receive shares in Kvika as payment for their shares in TM. For holdings in TM of a nominal value of ISK 771,892,669, TM shareholders shall receive shares in Kvika for a nominal value of ISK 2,509,934,076. The payment shall be made with the issuance of new share capital and the settlement date shall be 6 April. At a Kvika shareholders’ meeting today, a decision was made to increase the share capital by a nominal value of ISK 2,509,934,076 and, after this increase, the total share capital of Kvika shall therefore be ISK 4,696,651,571. Kvika has requested that its share capital be increased on the Stock Exchange and requested that the shares of TM be removed from trading and that the company therefore be delisted. The Stock Exchange is expected to announce i) how arrangements for TM shares shall be implemented and ii) the acceptance of new shares in Kvika for trading.

Before the merger, TM and TM tryggingar hf., a subsidiary of TM, were the owners of all share capital in Lykill and the shares in Lykill therefore expire with the merger without any special compensation, pursuant to  Art.129 of Act no. 2/1995 on Public Limited Companies.

Upon merging, the operations of Lykill shall be transferred to Kvika and will thenceforth be managed in a branch that is part of Kvika. Lykill shall initially continue to operate from Síðumúli 24, which shall be the place of payment for debt instruments for Lykill’s debtors. The name of Lykill shall remain unchanged and shall continue to be used in communications with Lykill’s customers. The email addresses of Lykill employees remain unchanged. The Lykill branch has been allocated the following ID number: 690121-2200.

The merged company will be a financially strong company with a broad revenue base, capable of offering its customers diversified options in all of the areas of financial and insurance services.

Kvika and TM have published an earnings forecast for 2021. The merging of the companies has substantially changed the assumptions of those forecasts and they are therefore no longer valid.  Work is being done on producing an earnings forecast for the merged company, which will be published when that task has been completed.

As has been previously stated, the boards of directors of the companies, believe it is realistic to expect the merger to achieve ISK 1,200-1,500 million in annual cost synergies, excluding business and one-off costs. In addition to this, it is believed that there are other cost synergy opportunities to be found, but these need to be explored further after the merger.

It is estimated that in three years, the merged company will have achieved revenue synergies in the amount of ISK 1,500 million annually. Revenue synergies come from the results of operations that would probably not have been achieved without the merger.

It is therefore estimated that, in three years, the annual profit from the revenue and cost synergies of the merged company before tax will be between ISK 2,700 - 3,000 million higher than it would have been for the companies if they had not merged.

Marinó Örn Tryggvason and Sigurður Viðarsson, the CEOs of Kvika and TM, will continue in their posts after the merger. Marinó Örn Tryggvason will be the CEO of Kvika and Sigurður Viðarsson will be the CEO of TM tryggingar hf. Ólöf Jónsdóttir, the managing director of Lykill, will start working at Kvika and occupy the post of managing director of the Operations and Development division as of 1 April 2021.

An Annual General Meeting for the merged company has already been called, pursuant to the notice of the meeting which was published today. The meeting will be held on 21 April.

Sigurður Viðarsson, CEO of TM trygginga hf.:

"The merging of Kvika, TM and Lykill marks a new chapter in the journey that started with the foundation of Tryggingamiðstöðin hf. in 1956. The merged company is both immensely strong and in a unique position to boost competition and diversification in the field of financial and insurance services in Iceland for the benefit of its shareholders and customers.

I am grateful to shareholders for the firm support they gave to the merger at the shareholders’ meeting today and their faith in the advantages which this merger entails is a great incentive for the tasks that lie ahead. The integration of the operations of the three companies can now take over, with the aim of utilising the best from each company and forming a strong whole that is capable of working for the success of the group for years to come.

The insurance services of the merged company will continue to operate under the brand name of  TM  and its objective will continue to be what it has been since 1956: to offer customers outstanding insurance services. The merger will make our services more diversified and fuel the development of more varied and modern options in financial and insurance services. We start this new chapter full of expectations."

Marinó Örn Tryggvason, CEO of  Kvika banki hf.

"The merging of Kvika with TM and Lykill will create one of the most interesting companies in Iceland. The merged company will be among the most valued companies on the Stock Exchange, since it is one of the biggest mergers in recent years.

Preparations for the merger have progressed very well and I’m grateful to the staff for all the effort they have put into this groundwork over the past months.

Financial undertakings are an important part of the infrastructure of our society and just as important to the economy as transport is to travel. The merged company will be able to play an important role in financing the necessary resilience of the economy as well as increasing competition in the financial market.

There will probably be long-lasting changes in communication, working methods and lifestyles when society gets back to normal again. New habits will emerge and even the most entrenched will change. Everywhere around us, financial undertakings are placing a growing emphasis on simpler and easier services. The company is both financially strong and capable of achieving results in this environment. This entails a great opportunity to simplify financial services and, in doing so, to increase the company’s share of the market. The task now is to turn those opportunities into reality."

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