"The merger of Hansapank and Hoiupank was a classic hostile takeover [of Hoiupank] initiated by [Hansapank's] large Swedish shareholders," said Olari Taal, former Hoiupank director and current Estonian minister of internal affairs.
"Estonian participants were pawns on a chessboard, since the entire merger took place with the knowledge of both banks' large owners and served their interests."
According to Taal, Hansapank had planned to extend its own capital through a stock emission in late 1997 but called it off because of the turmoil at the Tallinn Stock Exchange.
Meanwhile, Hoiupank doubled its capital through its own stock emission, and Hansapank felt it must follow suit.
The easiest way to do that, Taal says, was an emission directed to a single investor - in this case, Swedish bank Skandinaviska Enskilda Banken (S-E Banken). Meanwhile, ideas for a merger between the two were already on the horizon, Taal said.
"Swedbank, a 20 percent owner of Hoiupank, was limited to a 19.9 percent share in Hoiupank and couldn't risk that in the unified bank it could become a minor shareholder and lose out to its main competitor in Sweden, S-E Banken," Taal said. "Therefore the quick merger of Hoiupank had to be organised, which would meet the needs of Hansapank in terms of its own capital for some time."