BBVA Spanish banking giant, has affirmed that it possesses the required capital (to a value of up to 8 billion euros in the form of return) to finance an obligatory cash bid, which it intends to use to take over Banco Sabadell, where its present hostile market takeover attempts have been voted out in majorities. The CEO, Onur Genc, had asserted that the bank was still to acquire over one-half of the interest in Sabadell and altogether acquire it in its entirety in a full-stock acquisition worth 17 billion Euros.
BBVA possesses back-up funds to meet the regulations
BBVA Spanish bank, has made certain that it can raise between 8billion and 9.4billion Euros (8 billion) of capital to finance a compulsory cash takeover offer to Banco Sabadell if its already hostile takeover bid cannot secure majority shareholders. The CEO of the bank, Onur Genc, in a special interview offered to Reuters, has also suggested that the bank is confident in making an all-share acquisition worth in excess of 19.96 billion.
In case the bank is left with 30 percent and a maximum of 50 percent, the Spanish market laws would bully the bank to conduct an obligatory cash offer to the remaining stocks, or more so, the bank would be forced to drop the deal. The fact that the contingency fund is made up of the ABC Euros 8 billion implies that BBBV is very serious to ensure that the acquisition is completed despite any regulatory setback and any opposition it may face amongst the shareholders.
The merger would allow a European giant bank to be created
The ensuing merger would leave behind one of the largest lenders in Europe, whose total assets are about 1 trillion, and would enhance the presence of the BBVA in the retail banking, commercial too and electronic banking services. The merger would greatly improve the market and global presence, and operations of the BBVA. One of the wider European trends in banking is the strategic merger, according to which rather big and efficient financial organizations may compete on the international level.
In the above merger, industry analysts have taken an interest because of the perception that the merger can transform the Spanish banking industry into a game-changer. The acquisition initiative in relation to the purchase of Sabadell demonstrates that the concept of making its mark in the acquisition of the bank to generate significant synergies and economies of scale is something that BBVA is determined to do.
Acquisition rationale has strategic positioning as its result
The strategic positioning reasons as to why BBVA is insistent on finalising the strategy of acquiring Sabadell are based on the fact that the banking sector has become very competitive in Europe. The bank considers that a lot of value will be added to the bank under the merger in terms of increased scale, operational efficiency, and also to increase its customer base in some of its markets.
The acquisition strategy is determined by market regulations
Spanish market legislation suggests that the acquisition of a stake of 30 to 50 percent of a target company, which is vying with efforts made by BBVA in strategizing the different scenarios, includes some steps. The present case will enable it to adhere to the requirements of the mandatory offers and the freedom to apply them with flexibility due to the cash holdings of €8 billion.
The deadline of October 10 is actually one of the milestones through which the Spanish banking industry will undergo massive consolidation. With a combined total of one trillion assets of the two banks, such a merger has the potential to reshape the element of European banking landscape, both in their strategic interest in expanding by acquiring elements in the highly competitive landscape in the financial service sector.
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