Spain to Pay $330 Million to Help Unicaja Take Over Ceiss

Spain’s bank bailout fund agreed to pay as much as 241 million euros ($330 million) to help Unicaja Banco SA acquire its state-supported rival Banco Ceiss.

Malaga-based Unicaja plans to go ahead with the takeover even as support from Ceiss’s share and bondholders fell short of its threshold, the lender said in a regulatory filing today. The government-backed bailout fund, or FROB, agreed on a preliminary basis to cover compensation that retail investors are pursuing through the courts.

Completing the Unicaja deal would allow the government to avoid converting more than 600 million euros of FROB-owned contingent capital notes into a controlling stake in Ceiss, which has about 37 billion euros of assets. Spain last week ended the program of supervision it accepted as a condition of the 41 billion-euro of rescue loans it used to bail out banks including Bankia SA and Catalunya Banc as well as Ceiss.

The deal is expected to be completed by March 31, the deadline set by Unicaja, according to a FROB official who briefed reporters today on condition of anonymity. The lender said earlier its offer would expire that day if the necessary approvals hadn’t been obtained.

Ceiss will face tougher restrictions in return for the extra injection of taxpayers’ funds including more branch closures and job cuts.

The final number of investors who may be eligible for compensation may yet change as Ceiss will allow investors either to revoke their acceptance of the Unicaja offer or sign up to the deal during a three-day period which will open shortly, the filing said.

Under the terms of its bid for Madrid-based Ceiss, Unicaja stipulated holders of at least 75 percent of its stock and junior debt had to agree to exchange those securities for its own shares and bonds. If fewer investors agree to the swap, Unicaja has the option of pulling out of the deal, according to a Dec. 16 regulatory filing.

Those that decline the offer are likely to pursue compensation through the courts arguing they were mis-sold the securities.

Before it's here, it's on the Bloomberg Terminal.