425: BBVA Seeks Shareholder Approval for Banco Sabadell Acquisition in July Meeting

BBVA is seeking shareholder approval for a capital increase to facilitate the acquisition of Banco Sabadell through a share exchange offer.

Summary

• BBVA is holding an extraordinary shareholders meeting on July 5th to approve a capital increase for a share exchange transaction with Banco Sabadell.
• The offer involves exchanging one new BBVA share for every 4.83 shares of Banco Sabadell.
• The capital increase will be achieved by issuing new ordinary BBVA shares without preferential subscription rights.
• The final amount of the capital increase depends on the acceptance rate of the offer by Banco Sabadell shareholders.
• BBVA estimates the transaction will increase earnings per share by around 3.5 percent after realizing integration savings.
• The estimated impact on the CET1 capital ratio is a decrease of 30 basis points.
• BBVA intends to maintain its shareholder distribution policy, paying out 40 to 50 percent of profit, potentially through dividends and share buybacks, and distributing excess capital above 12 percent.
• The acquisition is subject to acceptance by Sabadell shareholders representing at least 50.01 percent of its share capital, regulatory approvals, and BBVA shareholder approval.

Sentiment

Score: 7

Explanation: The document presents a positive outlook on the proposed acquisition, highlighting potential benefits for shareholders, customers, and employees. However, it also acknowledges the risks and uncertainties associated with the transaction, resulting in a moderately positive sentiment score.

Positives

• The acquisition is expected to create a stronger and more competitive bank.
• BBVA anticipates an increase in earnings per share of around 3.5 percent after integration.
• The impact on the CET1 capital ratio is estimated to be a limited decrease of 30 basis points.
• Customers will benefit from a broader product offering and the global scope of the combined bank.
• Employees will have new professional opportunities within a larger, global institution.
• The combined bank will have greater capacity to offer financing for families and businesses, estimated at 5 billion per year.
• The combined bank will make higher contributions through taxes, resulting in greater economic and social progress.

Risks

• The acquisition is contingent on acceptance by Banco Sabadell shareholders representing at least 50.01 percent of its share capital.
• The transaction requires necessary regulatory approvals, including authorization from the Spanish National Securities Market Commission, the European Central Bank, and antitrust authorities.
• The integration of the two businesses may present challenges and could prevent the combined company from operating as effectively and efficiently as expected.
• The combined company may be unable to achieve the anticipated synergies or it may take longer than expected to realize them.
• Disruption of management time from ongoing business operations could negatively impact the market price of BBVA shares.
• The transaction could have an adverse effect on the ability of BBVA or Banco Sabadell to retain customers and key personnel.

Future Outlook

BBVA aims to create a stronger and more profitable bank through the acquisition of Banco Sabadell, better equipped to face the challenges of the financial sector and invest in digital transformation. The bank expects to maintain its shareholder distribution policy and distribute excess capital.

Management Comments

• Carlos Torres Vila, Chair, encourages shareholders to participate in the upcoming shareholders meeting.
• The transaction aims to combine both banks, building a stronger and more profitable bank, and an example in the market in terms of volume of assets, loans and deposits.
• This larger scale will allow the bank to face the structural challenges of the financial sector in better conditions, addressing in an efficient manner the rising needs for investments in digital transformation in an increasingly global sector.

Industry Context

The proposed acquisition reflects a trend of consolidation in the European banking sector, driven by the need to achieve greater scale, improve efficiency, and invest in technology to compete effectively in a global market. Other large European banks have also explored or engaged in mergers and acquisitions to strengthen their market position.

Comparison to Industry Standards

• The projected 3.5% increase in EPS is a significant target, comparable to synergy benefits seen in other large bank mergers such as the Intesa Sanpaolo and UBI Banca merger in Italy.
• The CET1 impact of 30 bps is relatively contained, suggesting a well-capitalized combined entity, similar to the impact observed in the merger of CaixaBank and Bankia in Spain.
• The commitment to a 40-50% payout ratio aligns with industry standards for shareholder returns among large European banks like BNP Paribas and Santander.

Stakeholder Impact

• Shareholders are expected to benefit from increased earnings per share and continued shareholder distributions.
• Customers will have access to a broader range of products and services.
• Employees will have new professional opportunities within a larger organization.
• The combined bank will contribute more to economic and social progress through increased financing and taxes.

Next Steps

• BBVA shareholders will vote on the capital increase at the extraordinary shareholders meeting on July 5th.
• Banco Sabadell shareholders will need to accept the offer for the acquisition to proceed.
• Regulatory approvals must be obtained from relevant authorities.
• BBVA will file a Registration Statement on Form F-4 with the SEC.

Key Dates