COPENHAGEN (Reuters) - Saxo Bank is to buy Dutch online bank BinckBank (BINCK.AS) for around $480 million to expand in the online trading and investment business where competition is heating up.
Traditional banks are having to compete with fintech startups, new payment providers and large internet platforms like Amazon (AMZN.O) venturing into the payment industry.
In addition, new regulation and increased demand from customers for improved digital services is adding to pressure on the industry.
“It’s an arms race developing unique technology, better mobile platforms, and cheaper and more diverse products,” Chief Executive Officer Kim Fournais, who owns 26 percent of Saxo, said in an interview with Reuters.
Saxo, which derives most of its income from its online trading platforms for private foreign exchange traders and others rather than traditional banking, is majority-owned by Chinese carmaker Zhejiang Geely Holding Group [GEELY.UL].
Fournais said that while BinckBank had lots of customers and good brands, it would be costly to develop its legacy technology and platforms.
“Migrating customers onto our platform solves part of the problem,” he said.
Saxo Bank hopes to add BinckBank’s 630,000 customers to the nearly 200,000 customers already using its platform, and aims to top 1 million users next year, the CEO said.
Fournais expects further consolidation in the online trading and investment industry, driven partly by negative interest rates and pressure on commissions.
“The likes of Amazon and Alibaba have still not entered this space, but that is of course a realistic scenario,” he said.
Saxo Bank will pay 6.35 euros per share, representing a premium of 35 percent to BinckBank’s closing price on Friday, valuing the deal at 424 million euros ($480 million).
The transaction, which was unanimously recommended by BinckBank’s board, will be funded via a combination of equity injections by Saxo Bank’s shareholders and cash.
Lazard (LAZ.N) acted as the sole adviser to BinckBank while JPMorgan JPN.M worked with Saxo Bank.
The two companies said late on Friday they were in advanced discussions regarding a potential combination of the businesses.
BinckBank shareholders will have to vote in favor of the offer at an extraordinary general meeting and it is expected that the offer, subject to certain conditions and regulatory approval, will close in third quarter of next year.
Reporting by Jacob Gronholt-Pedersen and Stine Jacobsen, additional reporting by Pamela Barbaglia; editing by Jason Neely