According to analyst Nuria Álvarez, this would occur with the aim of facilitating the operation given the possible reluctance of Sabadell regarding the merger, for which BBVA would use its excess capital, estimated at around US$ 3,320 million.
Renta 4 analyst Nuria Álvarez does not rule out the possibility that BBVA finances part of the merger with Sabadell with a cash payment, complementing the exchange of shares, which would pave the way for the completion of the operation.
Last Wednesday, BBVA announced its formal offer for Sabadell in which it proposes an exchange of 1 newly issued BBVA share for every 4.83 Sabadell shares, with a 30% premium over the value at which Sabadell was listed last Monday. , April 29.
This offer means valuing Sabadell at around US$11,890 million, following the price at which BBVA is currently trading of US$10.5 per share. In turn, it implies raising the value of the share in Sabadell to US$2.3 - it is currently listed at US$2 per share -, taking into account the 30% premium.
Following this exchange, BBVA would have to carry out a capital increase of 20% of its market capitalization, since it would have to issue 1,126 million shares.
However, Álvarez does not rule out that a part of this operation will finally be financed through a cash payment with the aim of facilitating the operation due to the possible reluctance of Sabadell regarding the merger, for which BBVA would use its excess capital. , estimated at about US$ 3,320.8 million.
From this excess capital, there will also be the bill for restructuring expenses - without accounting for other costs derived from joint ventures -, which BBVA estimates at around US$ 1,553 million, or in other words, a negative impact of approximately 30 basis points on the CET1 capital ratio.
For Álvarez, this capital impact is "very low" in an operation of these characteristics, something that HSBC analysts also point out, who consider that BBVA is very optimistic in this sense, accounting for a multiple of 1.7 times of the total of restructuring costs, despite the fact that in previous mergers this multiple has been around a multiple of 2 times.
Regarding the impact of the operation for shareholders, Álvarez has commented that, although a priori carrying out a capital increase for 20% of capitalization could have an effective dilution on the holders of shares prior to the issuance, the profit per share ( BPA) will benefit from the profits that the joint entity would generate, as well as the cost savings.
In fact, BBVA estimates that EPS will improve from the first year after the merger, reaching an improvement of around 3.5% once the cost savings are produced, which could be around US$910 million, before taxes. Additionally, the tangible book value per share would increase around 1% on the date of the merger.
For Álvarez, the cost savings will come from operating expenses (offices and personnel), but they may be even higher than those estimated by BBVA. "I think that, in this, they have not told us everything. There are no income synergies, but they still have more cost savings than what they are telling us. In the merger between CaixaBank and Bankia they were higher than initially estimated" , he commented.
BBVA OFFER
The offer that BBVA has made, and that Banco Sabadell is already evaluating, proposes the incorporation of three members of Sabadell as non-executive directors on the BBVA board of directors. In addition, one of them would be proposed as vice president.
The entity resulting from the merger would have one of its operational headquarters in Catalonia, specifically, in Sant Cugat (Barcelona) and the corporate name and brand would be those of BBVA, although the Banco Sabadell brand could be maintained, jointly with the BBVA brand, in those regions or businesses in which it may have a relevant commercial interest.
Regarding possible staff adjustments, BBVA indicates that, in their integration, the principles of professional competence and merit would be respected "in any case", without the adoption of traumatic measures or that singularly affect employees with origins in one of the two entities.
In this sense, it indicates that an integration committee will be established with representatives of both organizations "in order to design, with full respect for competition law regulations, the best integration process, seeking to maximize the existing talent in both entities".
"The management team of the resulting entity would be made up of executives from both banks, based on principles of professional competence and merit, trying to maintain proportionality based on the relative weight of the businesses," he underlines.
ASSETS OVER ONE TRILLION DOLLARS
In the letter, BBVA emphasizes that the combination of both entities would give rise to "the most attractive industrial project of European banking. In this sense, it highlights the benefits of the merger for both entities, their shareholders, employees, clients and the companies in which they are located. that operate".
BBVA assures that the new entity "would become one of the largest and most solid financial entities in Europe, with total assets over one trillion dollars and more than 100 million clients worldwide, with the ambition of being the largest bank by stock market capitalization of the euro zone".
The entity chaired by Carlos Torres says that "the larger scale would allow us to face the structural challenges of the sector in better conditions and reach a greater number of clients, efficiently addressing investments in digital transformation. The combined entity would be more solid and efficient, and a benchmark in the market for volume of assets, loans and deposits".
On the other hand, BBVA highlights the strategic fit and complementarity of both companies, with Banco Sabadell being the benchmark in Spain in the business segment and, like BBVA, a leading entity in digitalization and sustainability. In addition, Banco Sabadell's presence in the United Kingdom would add to BBVA's global scale and its leadership in Mexico, Turkey and South America.
The merger would be subject to obtaining the corresponding authorizations or declarations of non-opposition from the competent supervisors: the Ministry of Economy, Commerce and Business, the Bank of Spain, the European Central Bank (ECB), the National Commission of the Market of Securities (CNMV) and the General Directorate of Insurance and Pension Funds (DGSFP); and the competition authorities with jurisdiction (in particular, the National Markets and Competition Commission).
