Caixabank buys Bankia in €4.3bn all-share deal

Caixabank has agreed to buy Bankia for €4.3 billion in an all-share deal that creates Spain’s biggest domestic lender and points to long-awaited consolidation in European banking.

The merger would create Spain’s largest domestic bank measured by assets with a combined market value of more than €16 billion.

Bankia’s current chairman José Ignacio Goirigolzarri would be executive chairman of the merged bank and current CaixaBank CEO Gonzalo Gortázar would continue as chief executive of the resulting entity.

The main trade union involved, CCOO, fears large job cuts from a merged bank that would have over 6,300 outlets and more than 51,000 staff in Spain.

The merger must be approved by shareholders and regulators.

Caixabank would exchange 0.6845 new shares for every Bankia share, valuing Bankia at €1.41 per share.

That’s a 20% premium over Bankia’s closing price on September 3 or a premium of 28% over the average price of the last three months.

“The established exchange assumes that CaixaBank shareholders will initially represent 74.2% of the capital of the new entity, and those of Bankia will make up 25.8%,” said the banks in a statement.

“CriteriaCaixa, an entity 100% controlled by the ‘la Caixa’ Banking Foundation, will remain as CaixaBank’s reference shareholder with around 30% of the shareholding, while the FROB (Fund for Orderly Bank Restructuring) will hold 16.1%.

“The remaining shareholding structure of the combined entity consists of 54% free float (shares listed on the stock market), 37% of which belongs to institutional investors and 17% to the retail market.”

José Ignacio Goirigolzarri said: “With this operation, we will become the leading Spanish bank at a time when it is more necessary than ever to create entities with a significant size, thus contributing to supporting the needs of families and companies, and to reinforcing the strength of the financial system.”

Gonzalo Gortázar said: “The merger will allow us to face the challenges of the next 10 years with greater scale, financial strength and profitability, which will result in greater value for our shareholders, more opportunities for our employees, better service to our clients and a greater capacity to support Spain’s economic recovery.”

The banks’ statement added: “The combined entity’s total assets will exceed €664 billion, a volume that will make it the largest bank in the domestic market, with an important position at a European level and a market capitalisation of over €16 billion.

“The new group will consolidate its leadership in the retail banking sector in Spain, with more than 20 million customers and a top-ranking market share in all key products: deposits (24%), loans (25%) and long-term savings products (29%), which includes savings insurance, investment funds and pension plans.

“As a result, the bank will achieve a balanced and diversified geographical presence, with the most extensive and specialised network of branches in the sector, and a continued commitment from both CaixaBank and Bankia to maintaining the close relationship with the regional territories and to supporting financial inclusion.

“The combined entity will have presence in approximately 2,200 municipalities, and it will be the only bank operating in 290 of them …

“Over a period of five years, the combined entity is expected to progressively generate revenue synergies amounting to €290 million annually.

“Furthermore, its estimate points towards achieving annual recurring cost savings of €770 million (fully achieved by 2023), which will considerably increase the cost-to-income ratio up to highly competitive levels (pro forma cost-to-income ratio of 47.9% at 2019, including the full synergistic effect).”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.