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A steal of a deal for Danske
When Peter Straarup, the CEO of Danske Bank, went looking for his first acquisition outside of Scandinavia, Ireland appeared to be the perfect location.
When Peter Straarup, the CEO of Danske Bank, went looking for his first acquisition outside of Scandinavia, Ireland appeared to be the perfect location. Both the republic and the British province of Northern Ireland are growing faster than the European average and have young, expanding populations.
But only days after announcing the £967 million ($1.9 billion) purchase of Northern Bank, the biggest retail bank in Northern Ireland, and National Irish Bank, a midsize player in the republic, last month, Straarup got a rude reminder of the challenges facing Danske in its new market. A gang of thieves held the families of two Northern Bank employees hostage and stole £22 million in cash from vaults at the bank's Belfast headquarters. Police were investigating possible involvement by paramilitary groups in the province.
Danske won't lose a penny, but the heist could prove costly to Northern Bank's seller, National Australia Bank. It had insured Northern Bank against theft, and any diminution in the bank's value before the sale closes in 2005 will be reflected in the final sale price.
Even though Danske is protected financially, Straarup acknowledges that "a bank robbery is never welcome. From a public relations point of view, this is not good."
The 53-year-old banker insists that the logic of the purchase remains sound. The two banks will bring Danske 485,000 retail clients, expanding the group's customer base by about 15 percent.
Straarup joined Danske as an arbitrage trader in 1975 and ran its branches in Singapore and New York on his way to becoming CEO in 1998. Although initially skeptical about the wisdom of cross-border takeovers, seeing little potential for cost-cutting, he became a convert in the late 1990s, when Danske began moving abroad with modest acquisitions in Sweden and Norway. He now defines Northern Europe as Danske's home market and expresses confidence that the bank will swiftly integrate the Irish businesses.
"Expanding in Sweden requires almost as much work as buying a bank in Ireland," he says, noting that both have languages, currencies and banking regulations that are different from Danske's home market. He has set an ambitious target of cutting costs by 15 percent at the two Irish banks. "We've been fine-tuning our IT platform," he says. "It's in the back office that you save money. That is how you create value."