h25com| Barclays: If Savadell divested British subsidiary Bank of Bilbao, bid may require "additional money"

Zhitong Finance learned thatH25comBarclays analysts said that if Banco de Sabadell SA sold its British subsidiary TSB Banking Group, it would be able to open a bank in Bilbao, Spain (BBVA).H25comUs) increase cash for hostile takeovers. Analysts led by Cecilia Romero Reyes said in a report on Monday that the spin-off of TSB Banking Group "would allow BBVA to provide up to 10 per cent of the cash portion of the offer, with limited CET1 impact on BBVA shareholders". Analysts sayH25com"in the UK, BBVA includes that TSB will lack the scale to implement its growth strategy, which aims to combine size with profitability, and we think the divestiture may be welcome."

Spanish banking industry faces drastic changes in a rare hostile takeover

BBVA made a hostile bid for Savadr last week, a move that has not been seen in Spanish banks since the late 1980s. The company's acquisition offer will be 4% per share.H25com.83 shares of Savadr Bank for 1 new share of BBVA.

Banco Bilbao of Spain made an offer worth 12.23 billion euros ($13.11 billion) to rival Banco Savadr last Thursday, launching a direct offensive against shareholders. Although Savadr's board rejected the offer on the same terms earlier last week. The proposal values the bank at $12.2 billion, or $13.1 billion, according to an assessment by Royal Bank of Canada Capital Markets.

The conversion ratio proposed by BBVA, Spain's second-largest bank by market capitalisation, represents a 30 per cent premium to Savadr's closing price on April 29th. However, Savadr rejected the proposal in a statement on Monday, saying it significantly undervalued the bank and stressed that its independent strategy would create greater value for shareholders.

Even so, Carlos Torres Villa, executive chairman of BBVA, said they had made an attractive offer to Savadr shareholders with the goal of creating a larger bank in Spain, a key market.

Faced with the diminishing boost from high interest rates, Spanish banks are looking for new ways to increase revenues. A successful acquisition of Savadr Bank by BBVA would help it shift from its main markets Mexico and developing economies such as Turkey and South America to a more domestic-focused diversification strategy.

Onur Genc, CEO of BBVA, stressed that all stakeholders will benefit from the operation. He referred to the significant progress made by Savadr in recent years and said its shareholders now had the opportunity to join a banking entity with excellent growth and profitability in Europe. BBVA estimates that the deal will save 850 million euros in pre-tax costs and that Savadr's shareholders will take a 16 per cent stake in the combined bank.

BBVA's vision is to build a bank with more than 100m customers worldwide and assets of more than 1tn euros, which will make it second only to SAN.US in Spanish banking. The combined bank will also overtake Caixabank to become Spain's largest domestic bank. Currently, Caixabank has assets of more than 625 billion euros in Spain, while Caixabank has assets of just over 574 billion euros.

Hostile takeovers are not common in European banking, and the most recent case is Intesa Sanpaolo's successful acquisition of UBI Banca in 2020. Spanish banks are going through a period of consolidation as they seek to increase their competitiveness by cutting costs and expanding their size. Since the global financial crisis in 2008, the number of banks in Spain has fallen from 55 to 10 now.

Asked in a conference call with analysts last week whether TSB would be sold after the Savadr acquisition, Onur Genc, BBVA's chief executive, said it was "too early to tell". BBVA had previously tried to buy Savadr Bank at the end of 2020, but negotiations broke down over price. According to media reports at the time, Savadr Bank subsequently considered selling TSB.