BBVA wants to arm itself to face the possible purchase of Banco Sabadell after formalizing its public acquisition offer (takeover bid) just a week ago. As reported by the entity of Basque origin in a relevant fact sent this Friday to the National Securities Market Commission (CNMV), the bank calls its extraordinary general meeting of shareholders for next July 5 (on second call) to propose ” the capital increase necessary to carry out the exchange of shares with Banco Sabadell.”
Specifically, up to 1,126,339,845 ordinary shares will be issued, equivalent to 19% of the current capital, with a nominal value of 0.49 euros, which gives the operation a book value of 551,906,524 euros. After the increase, BBVA will have 6,693 million shares, so the new titles will represent 16% of the capital after the operation. They are valued at market price (9,968 euros at the close of Thursday) at 11,227 million euros and will be used to face the takeover bid for Banco Sabadell, rejected by the board of directors of the Catalan entity. The final number of new shares will depend on the percentage of acceptance of the takeover bid by Sabadell shareholders.
“This capital increase will consist of the issuance of new BBVA shares, which will be delivered to Banco Sabadell shareholders who accept the offer. It will not involve any disbursement by BBVA shareholders,” says the entity chaired by Carlos Torres in a press release. BBVA offers one share of its own for every 4.83 Sabadell shares, and the increase would cover 100% acceptance by the Catalan firm.
“With this capital increase we take a step in the purchase process from Banco Sabadell shareholders. The union of both entities will generate value for everyone and, in particular, for shareholders, by creating a stronger and more competitive bank,” Torres said in the same communication. Although the agenda of the call sets the maximum objectives in terms of quantity and new shares, the entity assures that “the final amount of the capital increase will depend on the number of acceptances received from the Bank’s shareholders. Sabadell.”
The capital increase by BBVA was seen as an expected movement and practically all analysts had discounted it as soon as the first offer was known at the beginning of May, even more so after the rapid refusal of Banco Sabadell because it considered the economic terms insufficient. of the proposal. In total, the excess capital available to the bank to take the step exceeded 3,000 million euros.
Now, BBVA admits that “this capital increase is one of the necessary steps within the purchase offer to Banco Sabadell shareholders for 100% of the shares,” which BBVA announced on May 9. “The operation aims to unite both entities to build a stronger and more profitable bank, capable of competing in an increasingly global sector with growing investment needs in technology and data,” the entity justifies its decision.
“This operation represents a clear generation of value for BBVA shareholders, with a positive impact on earnings per share (EPS) from the first year after the merger of both entities and an improvement of around 3.5%, once all the savings associated with it are obtained (estimated period of three years after the merger)”, explains the Torres entity, although the synergies, costs and savings make up one of the points of greatest discrepancy with what senior management thinks. from Banco Sabadell. Its own CEO, César González-Bueno, has come to estimate the undervaluation of the costs calculated by the bank that launched the takeover bid by up to 60%.
For its part, BBVA insists that, in addition to the 16% stake in the resulting entity, Banco Sabadell shareholders will benefit from a 30% premium over the closing of both entities on April 29, one day before know the offer; 42% on the weighted average prices of the last month; or 50% of the weighted average prices of the last three months. However, since the offer became known on April 30, Sabadell shares have experienced a particular bullish rally and, as of yesterday’s close, they still add up to a revaluation of almost 8% compared to that day.
Long deadline and government rejection
However, the operation is subject to acceptance of the offer by Banco Sabadell shareholders representing the majority of its share capital, obtaining the necessary regulatory authorizations, as well as approval of the capital increase required to the exchange of shares proposed at this extraordinary General Shareholders’ Meeting of BBVA.
The deadlines for all this to come to fruition are increasingly longer. BBVA estimates between six and eight months in total for the final resolution, while other sources point to more than a year of delay, above all, due to the necessary passage through the Competition authorities. And without forgetting, the frontal rejection of the Government, which has made it more than clear that the takeover bid could come to fruition, but that the final authorization of a merger depends on them and, to this day, the Executive opposes it because it would mean a decrease in the provision of financial services in regions and even a danger to territorial cohesion. In territories such as Catalonia and the Valencian Community, both merged entities would dominate the market.
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