Spain Premier Backs State-Owned Bankia Merger With Caixabank

Spanish Prime Minister Pedro Sanchez backed a merger of CaixaBank SA and Bankia SA that would allow the government to dilute its majority stake in Bankia.

“If the transaction takes place, the resulting bank will have a significant presence in Catalonia, Madrid, the Valencian community and the Balearic Islands,” he said. Bankia’s share value has increased since the news of a potential merger emerged, so the “transaction seems to have business logic,” he said.

Spanish governments have struggled to dispose of the state’s 62% holding in Bankia, acquired in a 2012 rescue of the failing Madrid-based lender. Spain has explored various ways to privatize the bank, including selling stakes in tranches, to recover some of the 22.4 billion euros ($26.5 billion) of taxpayer money used in the bailout.

CaixaBank and Bankia said last week they’re exploring a merger that would create the largest lender in Spain, with a market value of 14 billion euros and about 664 billion euros in assets.

The two lenders are currently negotiating the distribution of shares in the new entity. The Caixa Foundation, the bank’s biggest shareholder, may receive 27% to 30% and the state will end up owning about 17% through its BFA Tenedora de Acciones SA holding company, according to a person with knowledge of the matter. The banks’ other investors would get the remainder.

CaixaBank and Bankia declined to comment.

Traders are betting that Bankia shareholders may get premium of about 20% compared to their three-month average price prior to the talks being announced. Berenberg calculates the premium at 10% and expects Caixa to own 76% of the joint company, with Bankia taking the other 24%.

A merger could deliver more than 450 million euros a year in cost savings through closing down duplicate branches and cutting staff and generate close to 8 billion euros of negative goodwill, according to Bloomberg Intelligence.

©2020 Bloomberg L.P.

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