The battle over dividends marks BBVA’s takeover bid for Sabadell until the expected price improvement expected by analysts for the final part of the deal. Almost from day one, Sabadell positioned its shareholder remuneration policy as an easy-to-understand and quantifiable element to persuade its investors to reject a takeover bid.
Over four years, he put 2.9 billion euros on the table, which he has already begun to distribute. To match the proposal, BBVA would have to pay $18 billion over the same period, which the company has not committed to. The bank, led by Carlos Torres, has ruled out giving guidance on what direction the strategy might take.
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Meanwhile, Sabadell suggests it may increase that dividend. Until when? If it had the same shareholder compensation policy as BBVA, it would have an additional 800 million to distribute.
Since the last financial crisis, Sabadell has chosen to maintain its capital adequacy ratio at 13%, while BBVA has chosen 12%. Anything above this percentage is distributed to shareholders. The capital adequacy ratio measures the financial health of a bank as it relates the funds an organization has to immediately face possible unexpected events with the risk it takes on through the assets it pools. To demonstrate their solvency, the regulator requires financial institutions to maintain a percentage of capital relative to their high-risk assets. Sabadell estimates it at the aforementioned 13%, and BBVA at 12%. If Sabadell reduces its requirements to 12%, BBVA will free up 800 million to “deliver” to its shareholders through dividends.
As a result of Sabadell’s prudent policies, the bank led by Josep Oliu has the highest capital adequacy ratio as of June last year: 13.48%, after an improvement of 0.27 points during the semester. It is followed by BBVA with 12.75%. It has gained 0.08 points since January. Santander is next with 12.46%, up 0.2 points, followed by CaixaBank with 12.22%, after falling 0.16.
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At a meeting with shareholders last Thursday, Sabadell President Josep Oliu recalled that “there is an agreement of the board of directors under which excess capital above 13% will be returned to the shareholder.” At the meeting, President and CEO Cesar Gonzalez-Bueno explained to small investors that the adjustment BBVA made this week to its offering as a result of the dividend distribution is having a neutral impact on the offering or even worsening it.
The audience addressed by Oliu and Gonzalez-Bueno is important for the takeover bid because it can determine the success of the takeover bid. When BBVA’s interest in acquiring Sabadell became known, the Catalan bank said that 48% of the shares were in the hands of minority shareholders. It’s unclear how that figure will change, but Oliu said this week that “50% of our shareholders are you, and that’s very special for Banc Sabadell.” This statement suggests that the weight of small shareholders remains significant.
In addition to minority investors, investors who will play an important role in the operation are the so-called arbitrage funds. These are institutions that buy shares of a downtrodden bank at a low price, especially early in the process, in order to sell them to a bidder and capture a premium. Market sources claim that the percentage of this type of shareholder in Sabadell is very low.
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