OREANDA-NEWS. Fitch Ratings says that Oddo et Cie's (Oddo, BBB-/F3/bbb-) potential acquisition of BHF Kleinworth Benson Group would strengthen the bank's franchise.

Oddo has made a counter bid for the shares it does not own in BHF Kleinworth Benson Group at EUR5.75 per share. Oddo currently has a 21.6% stake in BHF Kleinworth Benson Group. The counter bid follows an offer launched in July 2015 by a company of the Chinese group Fosun International Limited at EUR5.10 per share.

Oddo has announced that it has secured to reach an at least 50.4% stake in BHF Kleinworth Benson Group through firm commitments with two large shareholders, owing 11.3% and 17.5%.

BHF Kleinworth Benson Group includes three main assets: BHF-Bank AG (BBB-/F3/bbb-) in Germany, Kleinworth Benson Wealth Management in the UK and Kleinworth Benson Investors in Ireland. As part of the deal, Oddo has announced that it has a binding agreement from Societe Generale for the latter to acquire the private banking operations Kleinworth Benson Wealth Management in the UK, a country where Oddo does not intend to expand. BHF-Bank is the targeted entity in the offer.

Fitch believes that the acquisition of BHF-Bank would strengthen Oddo's franchise. BHF-Bank specialises in wealth management and investment banking. In Fitch's view, this offer confirms Oddo's strategy to strengthen its franchise in its core businesses. A larger franchise in private banking, asset management and investment banking should provide the bank with a more robust earnings base through the cycle, as should geographical diversification.

Oddo has already taken steps to expand into Germany through two smaller acquisitions in 2014/2015 of a small investment bank, Seydler, and an asset manager, Meriten. The combination of Oddo and BHF-Bank, with an integrated offering, is likely to be seen as an interesting independent player with presence in two large European economies.

Fitch notes that Oddo's counter offer is still pending various regulatory approvals, expected at the latest on 30 April 2016. In addition, the agency will closely monitor the development of the offer and assess the financial impacts of the transaction on Oddo. As well as the expected impacts on Oddo's capitalisation, risk profile and profitability, Fitch will also assess the related significant execution risks.