BBVA raises its takeover bid for Garanti by 23% to offset the drop in the lira | markets

BBVA increases the effort to acquire 50.15% of the Turkish bank Garanti that it does not control. The entity chaired by Carlos Torres Vila has agreed to increase the price offered in cash for each Garanti share by 23%, as reported this morning to the CNMV. In this way the Spanish firm, which has 49.85% of the remaining capital, is now offering 15 Turkish liras from the 12.2 initially announced. The action of the Spanish bank has registered drops of 1.5% to 2% during the morning.

The price increase corresponds to the depreciation of the Turkish lira against the euro in the period since the offer was launched, on November 15: if then each euro was exchanged for 11.45 liras, now it is for 11, 86. Consequently, the offer, measured in euros, is lower now: from 1.06 euros per Garanti share to 0.95 euros. And if now it will pay a maximum of 31,595 million liras compared to 25,697 million in November, the amount in euros has dropped from 2,244 to the aforementioned 1,985 million. In both cases, these calculations are based on the assumption that all the minority shareholders of Garanti BBVA sell their shares.

The CEO of BBVA, Onur Genç, from Garanti, already pointed out in November that the fall in the lira could benefit the bank in this way: “Two things have changed, the entry price has evolved, because the devaluation of the currency He’s helping us.” The Turkish lira deepened the falls of the year that same month of November when the Central Bank, closely linked to political power, lowered interest rates. The very strong falls in the lira forced the Erdogan government to take measures to protect currencies, and the lira finally stabilized at the beginning of the year.

As a consequence of the increase in the price of the bid, and in accordance with Turkish regulations, the acceptance period will be extended for a period of 2 weeks, with which the end of acceptance will be May 18. As BBVA explains, in accordance with Turkish takeover bid regulations, the price of the offer cannot be changed during this 2-week extension of the acceptance period. If this initially lasted for 20 business days counting from April 4, now this new period extends from April 29 to May 18. In these two additional weeks of offer, it cannot be modified, so the price is final.

BBVA also points out that the financial impacts of the offer for the Spanish entity “will depend on the percentage of Garanti BBVA shareholders who decide to accept the offer.” BBVA estimates a maximum impact of approximately minus 34 basis points in Common Equity Tier 1 (“fully loaded”), in the event that all Garanti BBVA shareholders accept the offer. In this sense, the depreciation of the Turkish lira has also helped the bank: in the presentation to the market published on November 15, the entity reported a maximum impact on the capital ratio of 46 basis points.

As published by the Bloomberg agency at the beginning of the month, Turkish fund managers were pressing for a price increase, arguing precisely the fall in the lira and the good deal the bank is getting with an offer in Turkish currency. At the moment, no acceptance data for the offer has been disclosed.

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