After almost a year of open war between BBVA and Sabadell, with the OPA as a disruptive and trigger element, the meeting starring both financial entities enters its outcome. The National Commission of Markets and Competition (CNMC) has given its approach to the BBVA hostile acquisition on the Sabadell bank, leaving the possible absorption, which would result in the second largest bank in Spain. Although everything is not said. The competition opinion is just another step of the long OPA OPSEA of the BBVA on Sabadell. The next chapter of this plot will be the government’s response, which right now has the key to open the next door. The law provides that these commitments must be endorsed by the Executive, given that the transaction has been analyzed in the second phase by competence. The Council of Ministers will have a period of up to month and a half to establish its conditions.
In the midst of a convulsive calendar, analysts begin to capture their cabals on the future of the OPA. For most megatransactions, obtaining the approval of the antitrust authorities is a significant milestone that increases the chances of success; However, the authorization of the CNMC is a necessary, but not sufficient requirement. In fact, the yes of competition is just a means to achieve the true end of the BBVA: to achieve the non -opposition of the Executive and the acceptance of the offer by the Sabadell shareholders. For the first, the CNMC will communicate the decision to the Ministry of Economy, which has 15 business days to decide whether or not to modify the requirements imposed by the regulator. For the second, the solution is more complex and goes through guaranteeing a fair exchange for shareholders.
As Rafael Alonso, Bankinter analyst indicates, the probabilities of OPA success are reduced “if BBVA does not improve the exchange equation and increases cash payment.” Taking into account the latest proposal of the Biscayan Bank, an exchange of 1 action is offered for every 5.3456 Sabadell titles, in addition to an additional payment of cash of 0.70 euros per 5,3456 shares of the Catalan Bank. This proposal values Sabadell by approximately 2.40 euros per share, which represents an offer 5% below the 2.53 euros in which it quoted this Friday. After the market closure, this Friday the BBVA shares have risen 0.7%, while those of Sabadell have dropped 1.33%.
Although the cash component implies an immediate yield close to 5% for Sabadell’s shareholders, Alonso insists that the proposed price is significantly below the objective price that Bankinter estimates, which rises to 2.75 euros per share. This difference suggests, according to analysts, that the Bank’s offer chaired by Carlos Torres is below the estimated fair value from the beginning of the hostile OPA and, therefore, would try to acquire Sabadell with a significant discount. A stone on the road to the BBVA, which must first convince Sabadell’s shareholders, who have to give green light to the operation.
In summary, Bankinter’s analysis makes it clear that there is a margin to improve the offer presented by the BBVA between 10%and 15%without losing profitability: “We also think that BBVA has the capacity to improve the offer on Sabadell by 10%-15%, with an assumable impact on the CET1 capital ratio (currently in 13.09%compared to the objective of 11.5%/12.0%)”. According to the report, “it seems logical to think that this will not happen until the last moment, but if we are right, Sab’s shareholders would have an incentive to accept the OPA.”
From Bankinter they consider that, in the current context, the BBVA could benefit significantly from an eventual successful integration of Banco Sabadell: “In this scenario, BBVA could better manage the integration of Sabadell, anticipate the achievement of synergies valued at 850 million in a period of three years and improve the capital consumption of the operation (less minority)”. They also highlight that an operation with less minority shareholders would facilitate lower capital consumption, which would strengthen the global profitability of the group after the acquisition. Therefore, the entity could achieve “interesting profitability”, standing above 15%, despite increasing the purchase price. This perspective reinforces the thesis that the operation makes strategic and financial sense, provided that adequate execution and sufficient support by the shareholders involved are achieved.
An improvement of the offer is not expected until the end of June
Rent 4 Bank also points to an improvement of the BBVA OPA as the last resort to obtain the support of the shareholders. “The expected calendar remains, so that the offer for the shareholders of Sabadell is expected by the end of June. We do not expect an improvement of the offer at least until that period is opened, at which time it should not be ruled out that an improvement of the price can be given,” says the entity.
Beyond the reports of these entities, the consensus of analysts of Bloomberg The competition announcement for the Bank of Torres. These experts contemplate a 10.4% revaluation in the next 12 months. In the case of Sabadell, analysts who have updated their vision maintain their purchase recommendation, except in the case of BNP Paribas, which chooses to maintain. The global calculation foresees an increase of 5.1% of the next year.
Other analysts have also reacted. Filippo Maria Alloatti, director of Finance for Credit of Federated Hermes Limited, continues to bet that absorption will be a reality in the coming months and affirms: “I remain of the opinion that BBVA will finally acquire Banco Sabadell and I hope to have news of the National Commission of Markets and the Competition in this regard.”
