This Wednesday, BBVA published a letter with the details of its proposed merger with Sabadell. The operation consists of a merger by absorption of BBVA over Sabadell without cash payment, in which a newly issued share of the bank chaired by Carlos Torres is exchanged (each title is now listed at 10.18 euros) for 4.84 of the Catalan entity (the price is 1.8 euros).
After this exchange, the current Sabadell shareholders would have 16% of BBVA's capital. The extinction would then occur through dissolution without liquidation of Sabadell and the en bloc transfer of all its assets to the absorbing company, which will assume all its rights and obligations.
At that time, BBVA would incorporate three members of Sabadell to the board of directors as non-executives and would integrate its executives into the new organization according to merit-based criteria, he says. The vice president of the council would come from Sabadell.
It would also maintain the Sabadell name, but only in the regions and businesses where it is relevant, in which the two references would appear together in the brand.
"Although the corporate name and brand would be those of BBVA, the use of the Sabadell brand would be maintained, together with the BBVA brand, in those regions or businesses in which it may have a relevant commercial interest," he states.
It also recognizes the importance of Catalonia and says that there will be a double operational headquarters, in Madrid and in Sant Cugat. Barcelona's role as a European hub for innovative companies at an international level would also be reinforced. BBVA's registered office is located in Bilbao.
BBVA alludes to the "relevance" of Catalonia and assures that the new entity "would increase support for the business, cultural, scientific and social fabric through banking activity and its respective foundations."
After the operation, an "integration committee" would be created with representatives of both banks to design the new stage. When adding the workforce, attention will be paid to "professional competence and merit, without the adoption of traumatic measures or measures that uniquely affect employees originating from one of the two entities," he says.
In future management teams, he says, "proportionality" will be maintained based on the relative weight of each bank's business, he says. There would also be a specific advisory council for Spain with "institutional relevance."
The equation offered in the exchange, he says, represents a 30% premium over the closing price on Monday, the day before BBVA's intentions were known. The incentive is also 42% on the weighted average contribution of the last month and 50% on that of the last three months.
BBVA estimates the savings that the operation could provide at 850 million euros before taxes. It estimates that it would increase earnings per share by 3.5% starting in the first year and that the tangible book value would increase by 1% at the time of the merger.
Contrary to analysts' estimates, he assures that the negative impact on good quality capital would be barely three tenths, while "BBVA's attractive shareholder remuneration policy" will be maintained.
"The terms contained in this proposal have the approval of BBVA's board of directors, so we are prepared to immediately advance the operation," the bank states.
BBVA demands that the entity chaired by Josep Oliu send it "its assessment of the same as soon as possible" in order to "be able to present without delay a common merger project" to both boards of directors.
He also maintains that the "indicative" proposal is "for the benefit" of customers, shareholders and employees. "It would give rise to the most attractive industrial project in European banking," he says.
The assets of the resulting entity would exceed one billion euros, while the client portfolio would exceed 100 million. There would be the "ambition to be the largest bank by market capitalization in the euro zone."
The argument is that, by having more scale, it will be able to better respond to the structural challenges of the sector and gain competitiveness and profitability, which "would strengthen the capital position and lead to high remuneration for its shareholders."
When citing the authorizations necessary for the merger, BBVA refers to the Ministry of Economy and the National Markets and Competition Commission (CNMC).
