Spain's Banco Popular in talks to buy smaller rival
Spain's fifth largest bank, Banco Popular, is in talks to buy smaller rival Banco Pastor in an all-share deal reportedly worth 1.36 billion euros ($1.8 billion), the two banks said Friday.
If the deal goes through, it would be the first outright takeover of a Spanish bank since the sector was hit by the 2008 property bubble collapse and the international financial crisis.
"Following an analysis carried out in recent weeks, Banco Pastor shareholders have been informed of Banco Popular's interest in taking part in an operation that would allow it to gain the control of Banco Pastor," the two banks said in a joint statement.
"The talks focus on the characteristics of both entities, which have the same cultural and business profile, and on a project for growth that would consolidate the joint position of both in Spain's banking rankings."
The offer consists of:
-- 1.115 new Banco Popular shares in exchange for each Banco Pastor share. Based on the latest Banco Popular share price, that would value Banco Pastor's outstanding shares at 1.08 billion euros.
-- 30.9 new Banco Popular shares for each mandatory covertible bond in Banco Pastor. According to the daily El Pais, this part of the offer is worth another 277 million euros.
The Bank of Spain and the government have put pressure of Spanish banks to merge so as to cost costs and strengthen their balance sheets to cope with a mountain of bad property-related loans.
The financial restructuring has already cut the number of savings banks from 45 to 15 through a series of mergers.
Banco Pastor was one of five Spanish banks that in July failed European Union stress tests to assess the ability of lenders to withstand a prolonged recession.
Shares in both companies were suspended earlier Friday. At the time Banco Popular was trading up 1.30 percent at 3.565 euros while Banco Pastor had gained 4.80 percent to 3.03 euros.
Banco Popular had total assets worth 130 billion euros ($174 billion) at the end of last year, compared to 31 billion euros for Banco Pastor.
© 2011 AFP