European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>On 24 May, <a href="https://www.smartkarma.com/entities/banco-bilbao-vizcaya-argentari" target="_blank" data-smartkarma-citation="entities:21251:1" rel="noopener">Banco Bilbao Vizcaya Argentari (BBVA SM)</a> submitted the authorisation request for its all-stock offer for <a href="https://www.smartkarma.com/entities/banco-de-sabadell-sa" target="_blank" data-smartkarma-citation="entities:21295:1" rel="noopener">Banco De Sabadell SA (SAB SM)</a>. Closing expected to take 6-8 months.</li>
<li>Gross spread (CSP 27 May) is 7.6%, which This translates in a 52% implied probability of deal success. The fixed income market appears to share this view.</li>
<li>Nevertheless, from a long-only perspective, the risk/reward of Sabadell is interesting. The deal values Sabadell's shares at €2.07 each, an implied equity value of €11,187 million, for a 0.92 P/TBV.</li>
</ul>


On 24 May, Banco Bilbao Vizcaya Argentari (BBVA SM) submitted the authorisation request for its all-stock offer for Banco De Sabadell SA (SAB SM). Closing expected to take 6-8 months.
Gross spread (CSP 27 May) is 7.6%, which This translates in a 52% implied probability of deal success. The fixed income market appears to share this view.
Nevertheless, from a long-only perspective, the risk/reward of Sabadell is interesting. The deal values Sabadell's shares at €2.07 each, an implied equity value of €11,187 million, for a 0.92 P/TBV.


BBVA Files Hostile Offer: Conditions, Defences and Probabilities

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>KKR's Offer for <strong><a href="https://www.smartkarma.com/entities/alps-logistics-co-ltd" target="_blank" data-smartkarma-citation="entities:3935:1" rel="noopener">Alps Logistics (9055 JP)</a></strong> is a knock-out price. HUGE MINORITY WIN. This trades a little wide because the "gap risk" is so large, but it's still safe.</li>
<li>It's reasonable to expect the listing of various components of <strong><a href="https://www.smartkarma.com/entities/l-occitane-international-sa" target="_blank" data-smartkarma-citation="entities:6772:1" rel="noopener">L'Occitane (973 HK)</a></strong> other than in HK, would (should) be hugely accretive; for those investors who can (or may) participate.</li>
<li>
<strong><a href="https://www.smartkarma.com/entities/hankook-tire-technology" target="_blank" data-smartkarma-citation="entities:20031:1" rel="noopener">Hankook Tire &amp; Technology (161390 KS)</a></strong> seeks a controlling stake in <strong><a href="https://www.smartkarma.com/entities/hanon-systems" target="_blank" data-smartkarma-citation="entities:11506:1" rel="noopener">Hanon Systems (018880 KS)</a></strong>.</li>
</ul>


KKR's Offer for Alps Logistics (9055 JP) is a knock-out price. HUGE MINORITY WIN. This trades a little wide because the "gap risk" is so large, but it's still safe.
It's reasonable to expect the listing of various components of L'Occitane (973 HK) other than in HK, would (should) be hugely accretive; for those investors who can (or may) participate.

Hankook Tire &amp; Technology (161390 KS) seeks a controlling stake in Hanon Systems (018880 KS).


Last Week in Event SPACE: Alps Logistics, L'Occitane, Hanon Systems, Perpetual Ltd

<ul>
<li>On 6 May, the Board of Sabadell rejected the merger proposal as "it significantly undervalues its growth prospects and is not aligned with the interests of its customers and shareholders".</li>
<li>BBVA could take the offer directly to Sabadell shareholders, but a hostile offer seems extremely unlikely and there are no precedents in the Spanish banking sector.</li>
<li>I find it unlikely that both parties reach an agreement because the terms would likely be unfavourable for BBVA (premium 40%-50%). Market sentiment also suggests a low probability.</li>
</ul>


On 6 May, the Board of Sabadell rejected the merger proposal as "it significantly undervalues its growth prospects and is not aligned with the interests of its customers and shareholders".
BBVA could take the offer directly to Sabadell shareholders, but a hostile offer seems extremely unlikely and there are no precedents in the Spanish banking sector.
I find it unlikely that both parties reach an agreement because the terms would likely be unfavourable for BBVA (premium 40%-50%). Market sentiment also suggests a low probability.


<div>
<div>
<a href="https://www.smartkarma.com/entities/banco-de-sabadell-sa" target="_blank" data-smartkarma-citation="entities:21295:1" rel="noopener"><strong>Banco De Sabadell SA (SAB SM)</strong></a><strong> refuses to sell TSB to Co-operative Bank for €1,200 million</strong>. Sabadell confirmed that it had received "<strong>an unsolicited show of interest</strong>" from the British retail bank Co-operative Bank for 100% of the capital of TSB, its UK subsidiary. The offer, according to Sky News exceeds £1,000 million. Sabadell confirmed in a statement that it had received a letter from Co-operative Bank in which a proposal for an offer by TSB was presented. However, Sabadell said its Board of Directors had officially responded to the Co-operative bank saying that "this is not a transaction that we wish to explore at this time, as we have previously publicly expressed."</div>
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<p>The <strong>market is cautious about Sabadell, but less concerned about its solvency and asset quality</strong>. Sabadell has domestic exposure to SMEs, still vulnerable due to the Covid-19 crisis. Nevertheless, Sabadell is the best performer in the IBEX 35 this year, albeit it was penalized in 2020 due to the lack of visibility of its business, especially due to its subsidiary TSB and the possible impact of the crisis on bad debts. Sabadell bought TSB in 2015 for about 2.3 billion. TSB is mainly dedicated to mortgages (2% UK market share).</p>
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<div>
<p>Management sticks to the strategy that began earlier this year after the arrival of César González-Bueno “TSB was one of the great doubts that weighed on the group, the market gave it a zero value, but from now on its contribution is going to be high. It will be one of the key elements of our profitability". A new three-year plan was launched in May, and the contribution of TSB is paramount to improve  profitability. After accumulating losses of €500 million during the last three years, the British subsidiary begins to bear fruit thanks to a strong restructuring of branches and staff. In the first six months of the current year, it contributed €39 million to the Group's profits.</p>
<p>Sabadell has set itself the objective of reaching a ROTE profitability of over 6% in 2023. The market trusts TSB's contribution to the group's profitability due to the growth of mortgages in the United Kingdom and the prospects for a rate hike by the Bank of England.</p>
<p>Interest in TSB had a positive effect on the shares of Sabadell, last Monday closed 2.75% higher, although the shares rose by more than 5% during the session. TSB has a favorable outlook and the rejection of the Co-op Bank offer confirms management's strategy. For this reason, <strong>a possible sale of TSB in the medium term is ruled out. Without the contribution of TSB, the profitability of the strategic plan would be difficult to obtain</strong>.</p>
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<p><strong>Sabadell trades on 9.65x adjusted 2022e P/E and c. 0.36x PTBV</strong>. TP is €0.7/share (vs. a median Capital IQ consensus TP of €0.63), which represents a 7% upside.</p>
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Banco De Sabadell SA (SAB SM) refuses to sell TSB to Co-operative Bank for €1,200 million. Sabadell confirmed that it had received "an unsolicited show of interest" from the British retail bank Co-operative Bank for 100% of the capital of TSB, its UK subsidiary. The offer, according to Sky News exceeds £1,000 million. Sabadell confirmed in a statement that it had received a letter from Co-operative Bank in which a proposal for an offer by TSB was presented. However, Sabadell said its Board of Directors had officially responded to the Co-operative bank saying that "this is not a transaction that we wish to explore at this time, as we have previously publicly expressed."

The market is cautious about Sabadell, but less concerned about its solvency and asset quality. Sabadell has domestic exposure to SMEs, still vulnerable due to the Covid-19 crisis. Nevertheless, Sabadell is the best performer in the IBEX 35 this year, albeit it was penalized in 2020 due to the lack of visibility of its business, especially due to its subsidiary TSB and the possible impact of the crisis on bad debts. Sabadell bought TSB in 2015 for about 2.3 billion. TSB is mainly dedicated to mortgages (2% UK market share).



Management sticks to the strategy that began earlier this year after the arrival of César González-Bueno “TSB was one of the great doubts that weighed on the group, the market gave it a zero value, but from now on its contribution is going to be high. It will be one of the key elements of our profitability". A new three-year plan was launched in May, and the contribution of TSB is paramount to improve  profitability. After accumulating losses of €500 million during the last three years, the British subsidiary begins to bear fruit thanks to a strong restructuring of branches and staff. In the first six months of the current year, it contributed €39 million to the Group's profits.
Sabadell has set itself the objective of reaching a ROTE profitability of over 6% in 2023. The market trusts TSB's contribution to the group's profitability due to the growth of mortgages in the United Kingdom and the prospects for a rate hike by the Bank of England.
Interest in TSB had a positive effect on the shares of Sabadell, last Monday closed 2.75% higher, although the shares rose by more than 5% during the session. TSB has a favorable outlook and the rejection of the Co-op Bank offer confirms management's strategy. For this reason, a possible sale of TSB in the medium term is ruled out. Without the contribution of TSB, the profitability of the strategic plan would be difficult to obtain.









Sabadell trades on 9.65x adjusted 2022e P/E and c. 0.36x PTBV. TP is €0.7/share (vs. a median Capital IQ consensus TP of €0.63), which represents a 7% upside.










Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<p>For our next Smartkarma Webinar, we have the pleasure of welcoming back Insight Provider <a href="https://www.smartkarma.com/profiles/jesus-rodriguez-aguilar" target="_blank" data-smartkarma-citation="accounts:5842" rel="noopener">Jesus Rodriguez Aguilar</a> to go over ideas in European Event-Driven. Jesus will examine offers that target FTSE 250 companies (particularly in healthcare and financial services); the real estate sector in Central and Eastern Europe; and special situations in European share classes and holding companies.</p>
<h3>The webinar was hosted on Wednesday, 16 June 2021, 17:00 SGT/HKT.<a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=89974520966" target="_blank" rel="noopener"></a>
</h3>
<p>Watch the session here:</p>
<p><iframe src="https://www.youtube.com/embed/V5Kk8nkuLA8" width="560" height="315" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe>Or subscribe to our podcast feed and listen on the go:</p>
<p><iframe src="https://open.spotify.com/embed/episode/34F1xaRo0opzAuBgwai2wy?utm_source=generator" width="100%" height="232" style="border-radius: 12px;" frameborder="0" allowfullscreen="allowfullscreen" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture"></iframe></p>
<p>Jesus Rodriguez Aguilar is an Event-Driven Analyst looking across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations.</p>

For our next Smartkarma Webinar, we have the pleasure of welcoming back Insight Provider Jesus Rodriguez Aguilar to go over ideas in European Event-Driven. Jesus will examine offers that target FTSE 250 companies (particularly in healthcare and financial services); the real estate sector in Central and Eastern Europe; and special situations in European share classes and holding companies.
The webinar was hosted on Wednesday, 16 June 2021, 17:00 SGT/HKT.

Watch the session here:
Or subscribe to our podcast feed and listen on the go:

Jesus Rodriguez Aguilar is an Event-Driven Analyst looking across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations.

Smartkarma Webinar | European Event-Driven: Top Ideas

Spain

Banco de Sabadell SA attracts deposits and offers commercial banking services. The Bank offers mortgage, consumer, student, and building improvement loans, private banking services, and insurance, and sponsors Visa credit cards.  The Bank operates branches throughout Spain, elsewhere in Europe, the Caribbean, the Americas, and Asia.

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Banco De Sabadell SA (SAB SM)

BBVA Files Hostile Offer: Conditions, Defences and Probabilities

BBVA submits authorization request for all-stock offer for Sabadell, with deal expected to close in 6-8 months. Gross spread indicates 52%...

Jesus Rodriguez Aguilar

Last Week in Event SPACE: Alps Logistics, L'Occitane, Hanon Systems, Perpetual Ltd

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Hostile or Not?

Sabadell rejects merger proposal from BBVA, citing undervaluation and misalignment with interests. Hostile offer unlikely, agreement improbable...

Jesus Rodriguez Aguilar

Unlikely Disposal of TSB

TSB has a favorable outlook and the rejection of the Co-op's offer confirms management's strategy. A possible sale of TSB is ruled out. Without...

Jesus Rodriguez Aguilar

Smartkarma Webinar | European Event-Driven: Top Ideas

On 16 June, 5pm SGT, join us and Jesus Rodriguez Aguilar to go over top ideas in European Event-Driven, including offers that target FTSE 250...

Smartkarma Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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BBVA Files Hostile Offer: Conditions, Defences and Probabilities

​BBVA submits authorization request for all-stock offer for Sabadell, with deal expected to close in 6-8 months. Gross spread indicates 52%...

Jesus Rodriguez Aguilar

Last Week in Event SPACE: Alps Logistics, L'Occitane, Hanon Systems, Perpetual Ltd

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Hostile or Not?

​Sabadell rejects merger proposal from BBVA, citing undervaluation and misalignment with interests. Hostile offer unlikely, agreement improbable...

Jesus Rodriguez Aguilar

Unlikely Disposal of TSB

TSB has a favorable outlook and the rejection of the Co-op's offer confirms management's strategy. A possible sale of TSB is ruled out. Without...

Jesus Rodriguez Aguilar

Smartkarma Webinar | European Event-Driven: Top Ideas

On 16 June, 5pm SGT, join us and Jesus Rodriguez Aguilar to go over top ideas in European Event-Driven, including offers that target FTSE 250...

Smartkarma Research

BBVA submits authorization request for all-stock offer for Sabadell, with deal expected to close in 6-8 months. Gross spread indicates 52%...

Sabadell rejects merger proposal from BBVA, citing undervaluation and misalignment with interests. Hostile offer unlikely, agreement improbable...