BBVA’s takeover bid premium for Sabadell remains at 3% after swap equation adjustment | Companies

The market keeps frozen the premium for BBVA’s takeover bid for Banco Sabadell. Also after on Tuesday the organization chaired by Carlos Torres decided to make a double adjustment to the proposal due to the payment of both dividends of the Catalan bank and its own. So the difference between both companies is about 3%.

Yesterday Banco Sabadell paid its shareholders the dividend it announced at the presentation of its second-half results of eight cents per share. The business multiplied the payment by three to make its largest distribution to its shareholders since 2010. So once it paid out that amount and it was discounted from the share price, BBVA decided to do the same with the exchange equation so that it would also reflect the dividend payout. This figure rose from one BBVA share for every 4.83 Sabadell shares to 5.01 Vallesan shares.

At the same time, the Basque bank also announced a dividend payment last week. That would be the biggest gain in the company’s history following an 81% increase to 29 cents gross per share. The bank will make this payment on October 10. Last day of trading with the right to participate in the distribution (last date of bidding) will be October 7 of the following year, the first day of trading of BBVA shares without the right to participate in the distribution (ex-dividend date) will be October 8, 2024, and the registration date (recording date), 9th.

BBVA has already announced that once it has paid its dividend and its value is discounted from the share price, it will adjust the takeover bid again. Thus, Sabadell shareholders who accepted the offer will receive for every 5.01 shares of the Catalan company one BBVA share and 0.29 euros. Thus, they will not lose the right to receive dividends due to the delay in execution of the offer, but will receive it after its settlement.

This happens because when a company pays a dividend, the value of the dividend is subtracted from the share price. That is, the company decides to distribute profits among its partners and part of the value of the shares goes directly into your pocket without the need to sell the share. Thus, when a dividend-paying company is involved in a takeover bid, typically the firm making the takeover bid will reduce the remuneration by the same amount as the dividend; the shares are worth less than that money, and if not adjusted, it will artificially increase the premium.

The case of BBVA’s takeover bid for Sabadell presents a peculiarity since the payment is made entirely in shares of the Basque bank. Thus, once Sabadell paid the dividend and the share was worth eight cents less on the stock market, BBVA changed the exchange equation to reflect those eight cents less. Likewise, when BBVA pays its 29 cents, it will be reduced from its share price. Thus, when the takeover bid closes, Sabadell shareholders who accepted it will receive shares 29 cents cheaper than they were promised. To avoid this, BBVA will pay them dividends after the takeover is completed.

Neither of these two movements are new. On May 9, when it filed the takeover bid, BBVA had already explained in the offer announcement that it had submitted to the National Securities Market Commission (CNMV) that it was going to adjust the takeover deal if, from the time of its launch until then, it had come to the conclusion , that both Sabadell and they themselves paid dividends. Strictly speaking, this is in no way an improvement or change in the terms of the takeover offer. Given that this is a share offer and that Sabadell and BBVA shares will be worth 8 and 29 cents respectively on the market, the Basque bank has adjusted the exchange to maintain the proposed balance and which Sabadell shareholders will accept if the takeover offer is accepted. succeeds, 16% of his capital.

Thus, in the announcement of the takeover offer, BBVA has already stated that if Sabadell makes any dividend distribution, “the exchange offered as consideration will be adjusted accordingly in an amount equivalent to the gross amount per share of the affected distribution or distribution company” . .” ” Likewise, in the same document, the bank stated that if they are the one paying the dividend, “the consideration will be adjusted upward by including a cash payment for each share of the offeree company that accepts the offer equal to the gross amount of the dividend.” distribution” or the distribution per share of the offeror divided by 4.83 inches.

The market accepted the absorption adjustment without much change. Sabadell shares closed 0.22% higher at 1.79 euros, compared with BBVA’s 0.49% fall at 9.25 euros. Thus, the takeover premium is 3%, which is in line with the dynamics of recent months.