CaixaBank (CABK) SA, Spain’s fourth- biggest lender, agreed to buy Banca Civica SA (BCIV), a group of former savings banks, for 977 million euros ($1.3 billion) as an overhaul of the nation’s financial industry gathers pace.
CaixaBank’s all-stock offer values Civica at 1.97 euros a share, or 0.35 times book value, the buyer said in a statement late yesterday. The transaction, in which Civica investors get five CaixaBank shares for every eight of their bank’s shares, is priced 11 percent below its March 23 closing price.
Civica dropped 11 percent to 1.97 euros by 9:36 a.m. in Madrid trading, after both stocks were suspended yesterday. CaixaBank advanced 0.6 percent to 3.16 euros, after jumping as much as 3.3 percent at the open.
Adding Civica’s 72 billion euros of assets will create a lender with 342 billion euros in assets and 179 billion euros of deposits, CaixaBank said, giving it the biggest banking business in Spain. Chairman Isidro Faine said Jan. 27 he expected a “wave of mergers” as the government pressures lenders into deals by making them recognize losses on real estate that piled up on their books during Spain’s property crash.
“The operation creates value for shareholders of both banks, generating a bank with solid growth potential and a stronger future for CaixaBank amid a particularly difficult market climate,” Faine said in an e-mailed statement.
CaixaBank holds a webcast for investors at 10 a.m. in Madrid.
The share valuation for Civica in the transaction is 27 percent lower than the 2.70 euro-per-share price of its initial public offering in July, in which it raised 600 million euros. CaixaBank has a market value of 12.1 billion euros.
No Government Money
The transaction is expected to close in the third quarter and will generate cost savings and other benefits of 540 million euros by 2014, CaixaBank said, adding the deal can be completed without government money. CaixaBank will make a “value adjustment” for Civica assets of 3.4 billion euros that will be charged against reserves, meaning there will be no impact on earnings, the lender said.
Under the terms of the offer, the combined bank will have a pro-forma Basel II core capital ratio based on December numbers of 10.4 percent, CaixaBank said in an e-mailed statement.
The transaction won’t prevent CaixaBank from meeting the European Banking Authority’s 9 percent core capital ratio requirement by June this year, the bank said. The ratio of bad loans to total lending at the combined bank will be 5.5 percent.
CaixaBank said it intends to maintain its dividend at 0.231 euros per share in 2012. La Caixa, CaixaBank’s parent, will maintain control of the bank with a 61 percent stake, it said.
The government’s new rules, pushing banks to make bigger provisions for real estate losses, aim to encourage mergers and help the industry cut scale and costs. Civica, a lender formed from the combination of four savings banks in regions including Navarra, Andalusia and the Canary Islands, has to make gross provisions of about 1.25 billion euros because of the order, compared with pre-provision profit last year of 274 million euros.
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