Traders Bet Spain Earns at Least 20% Premium in Bankia Takeover

(Bloomberg) -- Traders are betting that Bankia SA stockholders may get a premium of at least 20% in an all-share takeover by bigger rival CaixaBank SA, based on customary calculations.

Using that level of premium, one Bankia share would be worth about 0.65 of a CaixaBank share, based on three-month average closing prices before the acknowledgment of talks for all-stock deal on Thursday. After both leaped Friday on the news, the two stocks hugged the 0.65 ratio, only to exceed it a bit by the close.

Securing favorable deal terms for Bankia shareholders is crucial for Spain’s government, which is the largest shareholder, via the state rescue fund known as Frob. The better the exchange ratio for Bankia, the more the state could earn in dividends and income from divestment.

The Frob is pushing for a 20% premium in deal talks, El Confidencial reported Saturday, citing various unidentified people. While both banks acknowledged talks, they could agree to terms far different than those that have leaked into press reports.

The Madrid-based lender is focused on returning some of the 22 billion euros ($26 billion) of public funds it obtained in 2012 as part of a state rescue.

A signal from Bankia or the Spanish government that they’re seeking more than 20% potentially could push up its share price with respect to CaixaBank’s.

Spokespeople for Bankia, CaixaBank and Frob declined to comment.

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