BBVA may pay cash for part of Sabadell takeover bid

Responsible for BBVA They have the opportunity to enter payment of part in cash as part of a proposal to take control of Sabadell without the need for prior approval from General Meeting of Shareholders. That’s how I tell youCEO Onur Genç told a group of bank investors about this during a meeting last week in Madrid.

The Turkish banker explained to investors present at the meeting (which Citi details in a recent report) that BBVA’s position is clear on its proposal, which considered “very attractive”. For this reason, the organization will not, under any circumstances, consider offering nothing higher than the equation of exchange

implied in the offer made public on May 1, which proposed to exchange 0.207 shares of BBVA for each share of Sabadell.

Investors asked the top manager about the possibility of changing the offer by introducing a monetary part. BBVA representatives insisted that the offer already announced was final, but admitted that hypothetical solution the monetary element will depend on the board of directors and not on the shareholders meeting at the meeting.

Until now, both Genç and President Carlos Torres have repeatedly insisted on refusal to improve the original offer. “It’s a good operation, but we have no way to increase the offer or change it, and no way to improve it,” he said at a press conference to unveil the proposal on May 9.

However, in recent weeks, analysts such as Bank of America have floated the idea that yes, there is a margin offer a cash portion, which will make the offer more attractive to Sabadell shareholders.

In its report, Citi estimated that for every €1 billion of cash it adds to its offering, the premium capital ratio (CET1) will be reduced by around 25 basis points.

Synergy, restructuring and adjustment

The document also states that those responsible for BBVA

getting ready give more details about the synergies and cost restructuring that will occur in the event of a merger with Sabadell.

So far, BBVA has indicated that the integration will be accompanied by a restructuring bill for the new entity of around €1.450 million, but with the additional details the bank is preparing, it hopes to be able to give “more context” to the market about its intentions.

Gench went even further in calculating what is known as fair valueadjustments that the purchasing organization must make to integrate the newly acquired bank and place both accounts on a homogeneous basis.

As published by EXPANSIÓN, BBVA believes that this reconciliation will have consequences about 2 billion euros in capital, including both legal provisions and the renewal of Tier 1 assets to market prices (first level assets in financial jargon, which refers primarily to stocks, bonds and funds), as well as the breakdown of alliances in bancassurance (with Zurich) and payments (with Nexi).

BBVA has not yet made a decision and is evaluating all options regarding other alliances with third parties.

The adjustments will be different for third-tier assets that are inherently more illiquid and difficult to value, such as mortgages. Genc explained to investors that the company compared with its external auditor how the value of these portfolios would be adjusted according to the expected loss criterion, but without taking into account current interest rate levels.