European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

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CaixaBank - Bankia Negotiations:La Caixa, Approvals, Badwill, Exchange Ratio and Synergies

CaixaBank-Bankia Merger Conversations Announcement: First Take

Event-Driven

The Boards of both <a href="https://www.smartkarma.com/entities/bankia-sa" target="_blank" data-smartkarma-citation="entities:21252:1" rel="noopener">Bankia SA (BKIA SM)</a> and <a href="https://www.smartkarma.com/entities/caixabank-sa" target="_blank" data-smartkarma-citation="entities:21255:1" rel="noopener">CaixaBank SA (CABK SM)</a> have approved the merger (in fact, the takeover of Bankia by CaixaBank) of both entities to create the biggest domestic bank in Spain.
<ul>
<li>target synergies of EUR 770 mn per year, and EUR 290 mn in extra turnover over the next five years (above my conservative scenario), target RoTE of 8% and efficiency ratio of 47.9%.</li>
</ul>
The exchange ratio has been bang-on the one mentioned in previous insights:
<ul>
<li>Actual 0.6845 shares of Caixabank per Bankia share (vs. the 0.68 mentioned using the implied exchange rates by 9) September).</li>
<li>No rights issue.</li>
</ul>
Recommendation: this merger will close and I recommend setting up the spread long 1 share of Bankia / shorting 0.6845 shares of CaixaBank (the gross spread is 1.6% as I write).
Considering the likely synergies could mean up to nearly 20% in the case of CaixaBank and c. 15% in the case of Bankia. On these grounds, both could be "long only" investment recommendations.
Read across: this merger will put pressure in smaller Spanish lenders, such as <a href="https://www.smartkarma.com/entities/liberbank-sa" target="_blank" data-smartkarma-citation="entities:21279:1" rel="noopener">Liberbank SA (LBK SM)</a> , <a href="https://www.smartkarma.com/entities/unicaja-banco-sa" target="_blank" data-smartkarma-citation="entities:28379:1" rel="noopener">Unicaja Banco SA (UNI SM)</a> , both currently solidly capitalised but barely profitable, and <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> with its coveted position in Spanish SMEs. All three are the main candidates in any forthcoming corporate activity, with Liberbank as the main takeover target.

The Boards of both Bankia SA (BKIA SM) and CaixaBank SA (CABK SM) have approved the merger (in fact, the takeover of Bankia by CaixaBank) of both entities to create the biggest domestic bank in Spain.

target synergies of EUR 770 mn per year, and EUR 290 mn in extra turnover over the next five years (above my conservative scenario), target RoTE of 8% and efficiency ratio of 47.9%.

The exchange ratio has been bang-on the one mentioned in previous insights:

Actual 0.6845 shares of Caixabank per Bankia share (vs. the 0.68 mentioned using the implied exchange rates by 9) September).
No rights issue.

Recommendation: this merger will close and I recommend setting up the spread long 1 share of Bankia / shorting 0.6845 shares of CaixaBank (the gross spread is 1.6% as I write).
Considering the likely synergies could mean up to nearly 20% in the case of CaixaBank and c. 15% in the case of Bankia. On these grounds, both could be "long only" investment recommendations.
Read across: this merger will put pressure in smaller Spanish lenders, such as Liberbank SA (LBK SM) , Unicaja Banco SA (UNI SM) , both currently solidly capitalised but barely profitable, and Banco De Sabadell Sa (SAB SM) with its coveted position in Spanish SMEs. All three are the main candidates in any forthcoming corporate activity, with Liberbank as the main takeover target.

CaixaBank - Bankia: Definitive Agreement and Exchange Ratio