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Spanish bank BBVA has offered TSB owner Banco Sabadell a 30 percent price premium as part of a takeover bid that values the local rival at more than 12 billion euros.
BBVA on Wednesday revealed the details of an offer it made the previous day, saying the combination of the two lenders would create “one of Europe’s largest and most robust financial institutions.”
With BBVA’s market capitalization at just under €60 billion, a successful deal would create a combined group close to Santander’s, valued at €73 billion.
The share price did not respond to the details of the offer because Spanish markets were closed for a holiday. Sabadell said Tuesday that his board would “properly analyze all aspects of the proposal.”
BBVA said Sabadell shareholders would own 16 percent of the combined company. It is offering one newly issued BBVA share for every 4.83 Sabadell shares, giving Sabadell a value of 12.3 billion euros. This corresponds to a premium of 30 percent above the closing prices on Monday and 50 percent above the weighted average prices of the past three months, said BBVA.
Its larger size “would allow the new company to address the sector’s structural challenges in better conditions and reach a larger number of customers while efficiently meeting investment needs related to digital transformation,” BBVA said.
Sabadell has a large number of small business customers, while BBVA is heavily involved in retail banking and serving large corporate customers.
Referring to its target’s stake in major British bank TSB, BBVA said: “Banco Sabadell’s presence in the UK would strengthen BBVA’s global reach and its leadership position in Mexico, Turkey and South America.”
Michael Christodoulou, an analyst at Berenberg, said before the details were announced: “A possible deal between the two banks would, in our view, make strategic sense. However, we believe that the immediate financial benefits of a deal may be modest.”
The two banks tried to reach an agreement four years ago at the height of the pandemic, but merger talks between the two collapsed after two weeks due to disagreements over pricing.
The deal would bring together the third and fourth largest banks in the Spanish market, creating a lender with the largest domestic balance sheet.
The combined group would represent 21 percent of Spanish mortgages and 23 percent of deposits, up from BBVA’s current share of 13 and 14 percent, respectively.
The two banks together account for 18 percent of branches in Spain, just behind CaixaBank’s 20 percent.
“From BBVA’s perspective, we can see the merits of such a deal,” said Iñigo Vega, an analyst at Jefferies, but added it was unclear whether the terms of the deal could be agreed.
Analysts have noted that a deal would dilute BBVA’s emerging markets exposure, which accounts for 84 percent of profits, according to Citigroup.