Spanish lender Banco Santander S.A. (SAN, BNC.L) announced Monday that its board of directors has approved a proposal to absorb Banco Español de Crédito, S.A, or Banesto, through a merger. Banco Santander currently holds 89.74 percent of Banesto's share capital.
Banco Santander said it will operate under a single brand in Spain by absorbing Banesto, and Banif, a 100 percent-owned unit of the Group. The merger of the two networks under a single brand will boost Grupo Santander's growth in both loans and deposits, the lender noted.
Banif has 36 billion euros of assets under management and 550 employees in 52 branches. Banco Santander said Banif will reinforce its specialized private banking network in Spain.
The company's decision is part of restructuring of the Spanish financial system, which will reduce the number of competitors and will result in larger financial institutions.
The restructuring will generate cost savings equivalent to 10 percent, or about 420 million euros in the third year. Revenues are expected to increase by 100 million euros, with total annual pre-tax synergies of 520 million euros from the third year. Earnings per share will be increased by 3 percent in the third year.
As part of the deal, minority shareholders of Banesto, who hold 10.26 percent of its capital, will receive existing shares in Banco Santander at a rate of exchange that will include a premium of 24.9 percent over the Banesto closing quote on December 14, resulting in 3.73 euro per share of Banesto.
Banco Santander Chairman Emilio Botín said, "This is a good transaction for everyone. For the shareholders of Santander and Banesto, who will receive a premium of 25% and shares with the most attractive dividend in the market; for customers of Banesto, who will have access to the Group's 14,000 branches around the world; and for employees, who will be able to have international careers."
Following the integration, Santander, Banesto and Banif customers will have access to a broader branch network, with 4,000 branches in Spain under a single corporate brand.
The integration will also result in the closure of about 700 of the three banks' 4,664 offices. The company noted that the related reduction in total employment will be implemented gradually, without abrupt cuts.
Santander's absorption of Banesto will have a neutral effect on its capital ratios. The merger will be completed in May next year and the operational and brand integration will be completed in 2013.
In Madrid, Banco Santander shares are currently trading at 5.84 euros, down 0.95 percent, on a volume of 15.16 million shares.
In London, the stock is trading at 474.05 pence, down 0.98 percent.
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by RTT Staff Writer
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