Nothing is being usual in the attempt of BBVA to absorb Sabadell. Less than 24 hours after being forced by a leak to file a merger offer to the bank of Catalan origin and to announce it publicly, the group chaired by Carlos Torres Vila has revealed the details of said proposal, despite not be obliged To do it. The second Spanish bank, thus, has reported that it is willing to take over the country's fourth through a share exchange what does it mean rate Sabadell still 30% more than its stock price last Monday, as well as that it would grant a vice presidency of the new entity to a director of its competitor (predictably intended for its president, Josep Oliú).

These are, precisely, two concessions that BBVA was not willing to do in the previous negotiation process in November 2020, when he offered a lower bonus and refused to give Oliú a vice presidency, according to Sabadell sources at the time, although BBVA denied the latter. The decision of the bank of Basque origin to make public the conditions of the offer officially seeks avoid speculationbut also puts pressure on the Sabadell councilwhich has not yet taken a position on it, since its shareholders are already aware of the benefit they could obtain.

The proposal, thus, involves evaluating the Actions of the entity in 2.2581 eurosin front of the 1,737 euros where they were trading on Monday and at the target price of about 1.85 euros which gives it the consensus of analysts, according to S&P Global. Sabadell shareholders would have the 16% of the new entity. BBVA values ​​the bank of Catalan origin at about 12,224 million euroscompared to a stock price of 9,403 million which I had two days ago. The cousin 30% is superior to the 20% who accepted CaixaBank to absorb Bankia in 2020, the last major banking merger in Spain, which, yes, occurred in the midst of a pandemic and with poor prospects for the sector that later did not come true.

More expensive

Some sources, however, maintain that Sabadell could aspire to a valuation of at least 2.3 euros per share, which would be equivalent to one minimum premium of 32.4%. It remains to be seen if BBVA would be willing to improve its proposal if necessary. The operation is already going to cost much more that when in 2020 The negotiations broke down, according to some sources for a figure close to 200 million. Then Sabadell was going through a bad time: it was worth 1.7 billion in the stock market before the contacts were announced and aspired to be valued at just under 2.5 billion, which BBVA did not accept. From then until Monday, its price has risen 452% and that of its competitor, 200% (at 63,634 million).

In a press release, in fact, BBVA has made an effort to convince your shareholders that the absorption of Sabadell is good for them. Thus, he has assured that the earnings per share will increase from the first year after the merger until reaching an improvement of 3.5% when the synergies planned. Estimates that it will achieve a reduction in operating expenses of about 850 million per year (achieved through office closure and the downsizing in the network and central services). To do this, you will have to invest 1,450 million and his capital will be reduced by 0.3 percentage points. The price offered is close to Sabadell's book value, so there will be no negative goodwill to finance these cuts or it will be very small.

BBVA also calculates that the tangible book value per share would increase around 1% on the date of the merger and that the operation would have a return of investment close to 20% in 2026. The figures, however, do not take into account the cost of breaking any of the bancassurance agreements of the two banks, predictably the one that Sabadell has had with Zurich since 2008.

Overcome resistance

The proposal submitted by letter this Tuesday by Torres Vila to the Sabadell council – which BBVA has published in its entirety, another unusual gesture – is designed to overcome obstacles that prevented integration almost three and a half years ago and overcoming resistance. Thus, it is announced to the advisors of the bank of Catalan origin that three of them, “selected by mutual agreement”, may join to the BBVA board (one as vice president), as well as that a Advisory Board for Spain, which would include “current directors and executives of both entities” (in Sabadell, the CEO, César González Bueno, and David Vegara). It remains to be seen what would happen with Pedro Fontanavice president of Sabadell and former director of BBVA, who according to some sources has had a relevant role in the offer.

Managers and employees are promised to respect “the principles of professional competence and merit, without the adoption of traumatic measures or that singularly affect employees originating from one of the two entities.” That is, they would agree to the ERE what the merger would entail. It is also stated that in the new management team will search for “save the proportionality depending on the relative weight of the businesses”, with which Sabadell executives will have some positions, even if they are a minority.

Reasons and nods to Catalonia

In the letter sent by Torres Vila, he also gave arguments to justify the meaning of the operation. Thus, he points out that the new bank would have the “ambition” of being the largest in the euro zone by stock market value, for which it would have to surpass BNP Paribas and Santander. Likewise, he affirms that the new entity would be more competitive and profitable and would give a “high remuneration” to its shareholders, “despite a macroeconomic context with prospects of rate cuts of interest and a foreseeable lower growth in credit investment in Europe”. He also reveals that he values ​​Sabadell for its strong weight in the SME business in Spain and its presence in the UK through its subsidiary TSB. There is also a message for the Government: there would be a “greater contribution via taxes” and the new bank would have the capacity to provide 5,000 million euros more per year in credit.

There's also winks to Catalonia. Thus, it is stated that there will be a “double operational headquarters in Spain”, so in addition to BBVA's Madrid office, Sabadell's office will be maintained. in Sant Cugat. Likewise, it is ensured that the “business, cultural, scientific and social fabric support” of the community will be increased and that Barcelona's “role as a European hub for the most innovative and disruptive companies in the world” will be reinforced. The new bank will continue to be BBVA with its headquarters in Bilbao, but the Sabadell trademark jointly with that of BBVA “in those regions or businesses in which it may have a relevant commercial interest.”

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