Supporting the BBVA in its hostile advance on Sabadell. Trusted Institutional Shareholder Service (ISS), the largest voting consultant in the world, is recommending that BBVA shareholders vote on the capital increase required to acquire Sabadell, which could reach 19.5% if there were absolute support from its shareholders. shareholders.
Influential Trusted Advisor Says Capital Raise Worth Supporting “compelling strategic logic” for business combination with Sabadell and to the extent that this allows us to foresee further consolidation in the European market if it occurs.
However, he notes that the Sabadell board’s rejection of the takeover bid and pending regulatory approvals “create uncertainty about the success of the proposal and subsequent integration and value creation for the combined group.”
BBVA called its shareholders on July 5 to gather the necessary support for a capital increase. This is one of three main permissions for the takeover bid to begin, together with permissions from the European Central Bank (ECB) and the National Securities Market Commission (CNMV).
The operation must also receive the green light from the National Markets and Competition Commission (CNMC), whose strictness or lack of conditions is key to the deal, but its approval does not have to be before the deal goes ahead. purchase, although this would dispel doubts. BBVA also sought permission from authorities, even from other countries such as the UK or Morocco, without their views interfering with the takeover bid itself.
At the meeting, he will request permission for said expansion and train his board of directors on the exact execution of the operation—both items that ISS advises supporting. If the quorum exceeds 50%, a simple majority is sufficient. backups are mandatory two thirds of them are less than the specified threshold, but not less than 25%.
Voting advisors are engaged advise institutional shareholders on how to act at meetings. In the case of a takeover by BBVA and Sabadell, it happens that they share many of the large funds, which could change the balance of the operation, although the Catalans have about 48% of the shares in minority hands and almost 79% of them are closely linked. associated with the organization as clients or employees and former employees of the bank. Among other BBVA shareholders and according to CNMV data BlackRock includes 5.917% capital; And Capital Research with a share of 5.027%.
To conduct merger and acquisition analysis, a proxy examines publicly available information and evaluates the strengths and weaknesses of a proposed transaction by weighing various factors that include, but are not limited to, valuation, market reaction, strategic rationale, negotiations and processes. conflicts of interest and management.
In the report published by ISS for the meeting, he recalls BBVA’s defense of the logic of the operation and its economic results, as well as the arguments of the Sabadell council rejecting it. Among other things, he says that BBVA believes it will create a “solid” organization with assets worth more than one billion euros and with a wider reach of potential clients. more competitive and profitable in a scenario of falling rates and with greater ability to improve shareholder rewards.
He adds that his proposed exchange included a premium of about 30% of the price of both banks before BBVA’s interests were leaked. note that BBVA expects synergies of $850 million. EPS growth of 3.5% per year and approximately 20% return on investment (ROIC).
He Sabadell councilAccording to him, he refused the operation, considering that “significantly underestimates” the potential of the Catalan bank and its growth prospects, given that it will create more value on its own. The board also promised investor rewards of $2.4 billion in the 2024-2025 biennium.
Regarding authorizations, the “trustee” indicates that the ECB’s analysis for authorization will be limited to the solvency and financial stability of the group, but it also includes government refusal through the Minister of Economy Carlos Bodi and the Vice President and Minister of Finance Maria Jesús Montero, as well as Acting President of the Generalitat Pere Aragones.
He also arranges the operation in “context of anticipation of European banking consolidation” or in the face of rising expectations for its arrival, relying on different voices that argue that there are too many banks and the market is too fragmented when it is necessary to create “strong” banks to face the challenges. digitalization, sustainable development and geopolitical risks.
In support of this analysis he cites statements from the German Claudia Buch, the new president of the ECB supervisory authority, blaming little cross-border activity by European banks and that they primarily operate in national markets and have subsidiaries; French President Emmanuel Macron, betting on European banks, and Unicredit executives Andrea Orcel and ING Steven van Rijswijk, celebrating confidence in the consolidation of the European banking sector.