valuation increases rain due to takeover bid

April 30, suggest that BBVA was preparing to take over Banco Sabadell by exchanging one BBVA share for 4.83 Sabadell shares, giving Sabadell a market value of €12.2 billion. Sabadell rejected the offer and messaging began until BBVA announced a hostile takeover on May 9.

In parallel, Investment firms issue reports analyzing the performance and changing their assessment of both companies. until yesterday. Result increasing both the recommendation and the 12-month price target, as reflected in analyst consensus compiled by Bloomberg.

Average target price Sabadell increased by 9.8%, to 2.01 euros per share (yesterday it closed at 1.89 euros), This is the highest since late 2015 and will see prices rise not seen since the summer of that year.

. Despite a series of seven target price increases and a 9.21% increase since then, the share falls short of the €2.26 at which BBVA values ​​the Catalan-born company. Sabadell has never posted as many buy recommendations (68.2%) nor recorded any sell recommendations.

Actions BBVA went from most retention recommendations before the offer was known to receiving same percentage of purchases after several recommendations improvements. The average price target rose 5.2% to €11.46 (15.6% potential), driven by a dozen analysts’ upgrades. Now it has best rating since the end of 2010, What This will take it to new all-time highs, exceeding €10.98 in April this year.

Deutsche Bank yesterday sent its clients a report on the Spanish banking sector, which is bullish on the sector and notes that mergers and acquisitions “are a surprise guest that adds spice.”

Alfredo Alonso, Deutsche Bank analyst covering Spanish banks: improved target prices for both Sabadell and BBVA.

“For the price we recommend keep Sabadell, but we recommend buying it, given that the shares have not reached the exchange rate offered by BBVA, “Therefore, we believe there is a good risk/reward opportunity to also play with the expectation of a recovery in BBVA shares and the success of the offering.” The new target price is 2 euros per share, which is in line with analyst consensus. “and downside risks appear limited.”

“We see BBVA’s appeal again after the share price fell due to its Sabadell offer. and we can expect a certain normalization of prices after the initial shock due to its movement,” explains Alonso. His target price is €11.40, slightly below average but 5% better than the previous €10.85. Alonso notes that this €10.85 was a “fair” price for BBVA’s pre-offer valuation, but we now also have to take advantage of the discount following BBVA’s 8.39% fall since April 30th. “Regardless of what happens with the Sabadell offer, we don’t believe it will change the bank’s earnings per share forecast, which shows the hit was probably not fully proportionate to what it deserved,” he says.