By Hannah Farrell, Liam Smith, Liam Ryan (TCD), and Shivaum Bapu, Patrick Gorton, Daniel Winsor, Nicole Phung, Pristie Sharma, Gurneek Gill (UCL)
Overview of the deal
Estimated Value: €4.5bn
Expected close date: Q1 2021
Acquirer advisor: Morgan Stanley
Target advisor: Rothschild
Amidst the increasing pressure on European banks to consolidate given rising bad debts and record-low interest rates, an all-share merger, by absorption, of Bankia by CaixaBank, has been announced. CaixaBank will exchange 0.6845 of its new ordinary shares for one Bankia share, which is a 20% premium over the exchange ratio at the closing on September 3rd, before news of merger talks came out. The transaction values Bankia at €1.41 per share, which is slightly lower than the September 17th close of €1.44.
This will create Spain’s largest domestic bank, with 25% of the market share in loans, 24% in deposits, and 29% in long-term savings products. The combined entity, which will maintain the CaixaBank brand, has a market capitalisation of almost €17bn and will have assets worth more than €650bn, putting it in a much better position to deal with the more complex environment that is anticipated due to the pandemic. Through greater scale, financial strength, and profitability, alongside a more balanced and diversified geographical presence, the joint company aims to improve services to customers, increase value for shareholders and provide greater support to Spain in its economic recovery.
“We will become the leading Spanish bank at a time when it is more necessary than ever…” – Bankia Executive Chairman Jose Ignacio Goirigolzarri
Company Details: Acquirer - Caixabank
CaixaBank is a Spanish integrated financial group. The group offers traditional banking services, as well as portfolio management, insurance, investment advisory, international banking, and other specialist financial services. It is currently Spain’s third-largest banking vender by market value and has the most extensive branch network in the Spanish market, serving over 15 million customers. CaixaBank was formed following the restructuring of Spanish banking firm La Caixa – a move which saw CaixaBank retain the banking and insurance activities of La Caixa group, as well as stakes in oil and gas firm Repsol and telecommunications company Telefónica, on top of holdings in several other financial institutions.
Founded in 2011, headquartered in Valencia, Spain
CEO: Gonzalo Gortázar
Number of employees: 35,589
Market Cap: €11.1 billion as of 27/09/2020
LTM Revenue: €8.96 billion
Company Details: Bankia
Listed on the Madrid stock exchange, Bankia is the 4th largest financial entity in Spain with over €170bn in assets. It was formed by the union of 7 Spanish savings banks in December of 2010 and offers a universal suite of banking services, including divisions in: Retail, Private and Business Banking, as well as Bancassurance, Asset Management and Real Estate Assets. The bank was also partially nationalised due to its near-collapse in the spring of 2012 but now reaches almost 8 million customers.
Founded in 2010, headquartered in Madrid, Spain
CEO: José Sevilla Álvarez
Number of employees: 15,950
Market Cap: €3.9 bn (as of 25/09/2020)
EV: €5.9 bn
LTM Revenue: €2.3 bn
LTM EBITDA: €0.8 bn
LTM EV/Revenue: 2.5x
LTM EV/EBITDA: 7.4x
Projections and Assumptions
The merger will create Spain’s largest domestic bank, beating out Santander and BBVA, this will sure up the bank’s future for the upcoming year by lowering costs and improving overall efficiency. This consolidation will reassure stakeholders during a time where bank loan defaults continue to rise as a result of pandemic pressures.