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BBVA could offer a portion in cash to improve its merger proposal with Sabadell, according to analysts

MADRID, 7 May.

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BBVA could offer a portion in cash to improve its merger proposal with Sabadell, according to analysts


BBVA could improve its offer to merge with Sabadell by including in its proposal the payment of part of the operation in cash, according to several analysts, something that would not affect its financial ratios, after yesterday the Sabadell board rejected the proposal " unsolicited" from BBVA considering that it "considerably undervalues" the Banco Sabadell project.

Specifically, XTB expert, Manuel Pinto, does not rule out BBVA improving its offer, although he recognizes that, at this time, both entities "are far from a possible understanding." However, he believes that the bank still has room to improve its offer, without affecting its future financial ratios, and giving credibility to the entity and the position of its president, Carlos Torres.

Furthermore, improving the offer with a cash payment could give "security" to Sabadell shareholders and the markets, which "have distrusted" the initial offer made by BBVA.

"It is a movement that we believe would have great benefits for both entities, taking advantage of the current economic situation," continues Pinto, who recognizes that Sabadell has generated "great value alone", multiplying its valuation and taking advantage of the Central Bank's rate increases. European Union (ECB) started in July 2022.

"However, in June we could begin to see a change in monetary policy by the organization chaired by Christine Lagarde, which calls into question the future growth of the companies with the greatest weighting of their results in the region, as is the case of Sabadell," he adds.

For her part, the Renta 4 analyst, Nuria Álvarez, already advanced last week in statements to Europa Press that, if the operation was rejected, one of the possibilities that BBVA had was to pay part of the operation in cash due to the reluctance of Sabadell.

To do this, BBVA has an excess of capital of around 80 basis points, which translates into an amount of 3,000 million euros. Until now, BBVA's offer, rejected by Sabadell, involved offering one newly issued BBVA share for 4.83 Sabadell shares, including a 30% premium over the price that Sabadell set on April 29, one day before. if the operation is known.

After learning about Sabadell's position, Álvarez points out that the bank chaired by Josep Oliu has been "reluctant" to a merger with BBVA, although it does not imply a "resolute no" to the operation, an opinion that is also supported by the Bestinver Securities analyst. , Fernando Gil de Santivañes, pointing out that Sabadell's statement yesterday mentioned the low performance and volatility that Sabadell's stock was having. "We see this as an indicator of preference for cash over stocks," explains this analyst.

Both Gil de Santivañes and Álvarez point out that BBVA has some margin to offer cash in the offer using the excess capital it has over the regulatory capital requirements, located at 11.5% of CET1. They believe that the bank will increase its initial offer of the premium offered in the share exchange by 10%, so, based on the price at which the securities closed yesterday, it would mean an improvement in earnings per share (EPS) of 4%.

Beyond this option, the XTB analyst indicates that BBVA has more options on the table to achieve a merger in Spain, including Bankinter or Unicaja, which would leave Sabadell "very far" from the country's large entities.

Pinto points out that BBVA's strategy "seems clear" in betting on its business in Spain, based on the improvement that Spanish entities and, in general, those in Southern Europe, are experiencing compared to their counterparts in the North.

For this reason, the XTB expert does not rule out new attempts by BBVA to achieve its objective through "some movement" with other entities, if the end of the negotiations with Sabadell is confirmed.

Thus, it brings Bankinter into the equation, taking advantage of the loss of interest margin growth that this entity has registered in Spain - but which is balanced by the increase it registers in Portugal -. Furthermore, in Spain, the bank led by Gloria Ortiz has grown "considerably" in customer resources or in its banking unit, while the cost of this operation would be lower than that of Sabadell.

Regarding Unicaja, Pinto highlights that it could be a target of both entities. "While it would allow Sabadell to make ground on Spain's three large banks, for BBVA it would meet some interesting points, given its exposure in Spain and the double-digit growth of profit and loss account margins," he explains.

For his part, the Bestinver Securities analyst points out the possibility of BBVA launching a hostile takeover bid, which is "legally possible", but considers it a "very unlikely" possibility, given that close to 50% of Sabadell's investors are retailers and these would follow in a "large proportion" the recommendation of the Sabadell board of directors.