BBVA proposes that Banco Sabadell merge both entities to create a European financial service provider.
In a letter addressed to the Board of Directors of Banco Sabadell, BBVA emphasizes that the combination of both entities “would give rise to the most attractive industrial project in European banking.”
In this sense, it highlights the benefits of the merger “for both entities, their shareholders, employees, clients and the companies in which they operate.”
Firstly, because the new entity would “become one of the largest and most solid financial entities in Europe , with total assets of over one trillion euros¹ and more than 100 million clients worldwide, with the ambition of being the largest bank by market capitalization of the euro zone.”
The larger scale would allow them “to face the structural challenges of the sector in better conditions and reach a greater number of clients, efficiently addressing investments in digital transformation. The combined entity would be more solid and efficient, and a benchmark in the market by volume of assets, loans and deposits.”
On the other hand, BBVA highlights “the strategic fit and complementarity of both companies , with Banco Sabadell being the benchmark in Spain in the business segment and, like BBVA, a leading entity in digitalization and sustainability.”
Furthermore, Banco Sabadell’s presence in the United Kingdom “would add to BBVA’s global scale and its leadership in Mexico, Turkey and South America.”
For all these reasons, the merged entity “would be the best financial partner for families and companies , with a better product offering and a greater capacity to accompany companies in their international expansion.”
Ultimately, the capacity of the new entity “to provide credit to the real economy would be amplified – with an estimated future impact of an additional 5 billion euros per year – in addition to contributing significantly to the process of transformation, innovation, and decarbonization of society.”
The creation of a stronger and more profitable entity “would also translate into a greater contribution via taxes and a growing and attractive remuneration for shareholders.”
In this sense, BBVA highlights its total commitment “to Catalonia, a key market for both entities.”
From a position of greater strength, the merged entity “would intensify its support for the business, cultural, scientific and social fabric of Catalonia, through banking activity and the respective foundations.”
In addition, the new bank would have “a double operational headquarters in Spain, one of them in the Banco Sabadell corporate center in Sant Cugat, and would reinforce Barcelona’s role as a European ‘hub’ for the most innovative and disruptive companies in the world.”
BBVA also shows its commitment to “preserving the best talent and culture of both entities and proposes several key measures:
i) The formation of an integration committee with representatives of both organizations, in order to design the best integration process, seeking maximize the talent of both entities;
ii) Respect in all cases of the principles of professional competence and merit in the integration of staff, without the adoption of traumatic measures or measures that singularly affect employees originating from one of the two entities;
iii) The configuration of the management team of the merged entity with executives from both banks, taking into account the principles of professional competence and merit, seeking to maintain proportionality based on the relative weight of the businesses;
iv) The creation of an advisory council for Spain that would have institutional and commercial relevance and would include current directors and executives of both entities.”
Regarding the corporate bodies of the merged entity, BBVA proposes “the incorporation to the Board of Directors, as non-executive directors, of 3 members of the current Board of Directors of Banco Sabadell, selected by mutual agreement, with one of them occupying a vice-presidency.”
On the other hand, although the company name and brand “would be those of BBVA, the joint use of both brands would be maintained in those regions or businesses in which it may have a relevant commercial interest.”
In relation to financial terms, the proposed exchange equation “is very attractive for Banco Sabadell shareholders: 1 newly issued BBVA share for every 4.83 Banco Sabadell shares, which represents a premium of 30% over the closing of the last April 29; 42 % on the weighted average prices of the last month; or 50% of the weighted average prices of the last three months.”
After the merger, Banco Sabadell shareholders “would have a 16.0% stake in the resulting entity, thus additionally benefiting from the value generated by the operation.”
The proposed merger would also mean “a clear generation of value for BBVA shareholders . According to BBVA estimates, this transaction is positive in earnings per share (EPS) from the first year after the merger, achieving an improvement of approximately 3.5% once the savings associated with the merger are produced, which are estimated at approximately 850 million euros before taxes.”
Additionally, the tangible book value per share “would increase around 1% on the date of the merger.”
The operation would offer “a high return on investment (ROIC³ close to 20% for BBVA shareholders).”
All this with a limited impact “on the CET1 of approximately -30 basis points (4) at the time of the merger, while maintaining BBVA’s attractive shareholder remuneration policy.”
In summary, the proposed merger generates value “for all stakeholders: shareholders, employees, customers and society as a whole.”
