Sabadell calculates that BBVA I’d have to increase to 15,000 million of euros expected remuneration for 2024 and 2025 so that the shareholders of the Catalan entity receive the same payment, of 2,400 million of euros, which it plans to give alone, according to what market sources have told Europa Press.
The bank calculates, taking into account the 16% stake that Sabadell shareholders would have in BBVA once the merger was completed, that the entity chaired by Carlos Torres will distribute some 11,250 million euros between 2024 and 2025 (7,500 million euros in cash and 3,750 million in buybacks) to which the 2.4 billion euros that Sabadell plans to distribute alonein such a way that a figure of 13.7 billion euros would be reached.
With this total distribution figure, Sabadell shareholders would receive around 2,200 million, that is, 200 million less that if the entity continued with its project alone, as the board of directors has defended since last May 6, when it rejected BBVA’s merger offer. In this way, for 16% of Sabadell shareholders to receive 2,400 million, BBVA would have to increase its dividend by 1,300 million, up to 15,000 million euros.
The commitment announced by Banco Sabadell is distribute around 2.4 billion euros to shareholders between 2024 and 2025 -considering both the estimated results for the period and the excess CET1 capital of more than 13%, after the implementation of Basel IV- which represents close to 25% of the entity’s market capitalization.
For its part, BBVA has defended on several occasions its commitment to distribute among 40% and 50% of the profit that it obtains, combining cash dividends and buybacks, and its commitment to distribute any excess capital above 12% of CET1.
However, Sabadell also believes that part of BBVA’s excess capital would have to be allocated, if the merger materializes, to the capital impacts that the operation would produce, which would would reduce the payment to shareholders. These impacts, as pointed out by the CEO of Sabadell, César González-Bueno, would be adjustments to fair value, restructuring costs and termination of commercial agreements or joint ventures that Sabadell has.
In its offer, BBVA estimated that the operation would entail positive synergies of 850 million euros, while the restructuring expenses would be around 1,450 million euros, with an approximate impact of 30 basis points on the CET1 ratio. In fact, the bank defends that these figures have been calculated with the “maximum rigor.”
However, González-Bueno stated in mid-May that the impact on capital that Sabadell estimates would be “significantly higher” than those 30 basis points.
“In the letter that BBVA had sent, a multiple of 1.8 appeared. The council applied a corrective factor and concluded that it would be a multiple of three. Nobody is managing to make those synergies [de 850 millones] with a cost that is not three times the savings generated. That is, what we could call, in simple terms, a three-year payback”González-Bueno explained.
Furthermore, he recalled that the impact that BBVA estimates does not include the breakup due to joint ventures, especially those that Sabadell has with Amundi in asset management and with Zurich in bancassurance. “I cannot give that figure because it is not public, but it is significant and the council also included it,” he detailed in this regard.
Thus, by taking into account these recalculations, plus the adjustments to the fair value of the forward portfolio and Sabadell’s own assets, the board of directors of the Catalan entity concluded that the impact on capital of the operation I would be ““significantly higher” than 30 basis points that are included in the BBVA announcement.
In fact, market sources do not rule out that negative synergies, especially in the SME segment, and they cite the example of the acquisition of Banco Popular by Santander, which included a negative impact on income equivalent to 9% of Popular’s.
Another issue is the evolution of BBVA and Sabadell shares and their reflection on the probability of success of the hostile takeover bid. In this type of operations there is usually a adaptation of the shares to the established exchange equationwhich reduces, in practice, the premium offered when announcing the offer, as happened, for example, in the friendly merger between CaixaBank and Bankia.
The bank chaired by Carlos Torres launched the offer with an exchange ratio of one newly issued BBVA share for 4.83 Sabadell shares, which meant a premium of 30% on the value of the securities to April 29, one day before knowing the intention to merge both entities. However, currently, with several months left before the acceptance period is launched, the premium is at 5%.
The Renta 4 analyst, Nuria Alvarez, points out that the correlation between both stocks exists as there is an exchange equation and, in general terms, the prices of BBVA and Sabadell are moving in the same direction. However, he assures that there are days when this effect is not occurring, so The premium has been narrowed to 5%, compared to the previous 7% or 8%.
In fact, market sources attribute the revaluation What is the bank experiencing? in a bagand not only to the takeover bid, as would be the evolution of the rest of its competitors, both Spanish and European, the increase in earnings per share, the recent improvement in the credit rating or the inclusion in the MSCI World Index, which gives greater visibility to investors, especially institutional ones.
On the other hand, BBVA’s action would be impacted by the outcome of the presidential elections in Mexico, a key market for the entity and where Claudia Sheinbaum, a candidate endorsed by the outgoing president, Andrés Manuel López Obrador, won. Although there has been no official statement from the candidate, a few days ago the newspaper ‘Financial Times’ reported that the Mexican Executive was considering the creation of a special tax on credit institutions.
In this way, Sabadell would currently be estimating a probability of success of the takeover bid of around 27%, according to the same sources, although the hostile operation has just started with requests to the supervisors to be able to formalize it.
BBVA estimates that this process can take between six and eight monthsand later the acceptance periodwhich could be prolonged 70 daysalthough the OPA law protects the possibility of requesting an extension of the deadline if “it turns out to be necessary.”
Information prepared by Europa Press.
