The Boards of Directors of Unicaja Banco and Liberbank approved yesterday the merger project under which Unicaja Banco will absorb Liberbank. Under the transaction, Liberbank shareholders will receive newly issued Unicaja Banco shares in the following ratio: 1 Unicaja Banco share per each 2.7705 Liberbank shares.
The transaction involves the creation of the fifth bank in the Spanish financial system in terms of assets, with a broad and diversified presence across the country and a strong position in six Autonomous Communities, a sound and quality balance sheet and a professional team with broad experience in generating value for shareholders through integration projects.
The transaction will allow the combined entity to gain size to face in the best possible way the challenges of the industry, including those arising from the economic environment, the current interest rates –with historic low records-, as well as the ongoing transformation and digitalization process. The combined entity is expected to reach recurring cost savings of nearly 192 million euros per year (in full from 2023), significantly improving the cost-to-income ratio.
Due to the starting solid solvency position of both Unicaja Banco and Liberbank, the combined entity, after important provisioning to accelerate NPA reduction, is expected to reach a fully loaded CET1 ratio of 12.4%, the highest among the listed banks as per September 2020 data, to be the first in coverage (67%) and the second listed bank with the lowest NPL ratio (3.8%). The transaction will allow the combined entity to significantly improve its profitability vis-à-vis market outlooks and to improve by c.11 percentage points its cost-to-income ratio. Likewise, the generation of synergies will result in the increase of the benefit per share of both banks by c.50% with regards to the market estimations for 2023.
The new bank, which will maintain the corporate name Unicaja Banco and will be headquartered in Malaga, aims to provide value to shareholders, improving profitability, as well as to improve the offering and quality of service to customers and to continue supporting the country’s economic recovery, while maintaining as shared values closeness and commitment to regions. The Executive Chairman will be Manuel Azuaga, currently Executive Chairman of Unicaja Banco, and the CEO will be Manuel Menéndez, currently CEO of Liberbank.
The transaction is subject to approval by the General Meeting of Shareholders of both banks, expected to be held in the first quarter of 2021, as well as to the mandatory regulatory authorizations, which are expected to be received in the end of the second quarter or early third quarter 2021.
Transaction description
Considering the established exchange ratio, Unicaja Banco shareholders will hold 59.5% of the new entity’s share capital and Liberbank shareholders will have 40.5%.
Manuel Azuaga remarked that ‘with the merger we constitute the fifth Spanish bank in terms of assets, leading in six Autonomous Communities, with a position of financial strength and a larger size to better face the challenges of the industry, and to continue providing support to the country’s economic recovery, while maintaining closeness and commitment to the regions as shared values of both banks and on the path of good corporate governance practices’.
Manuel Menéndez remarked that ‘the transaction intends to provide value to shareholders, customers and employees, improving efficiency and profitability, and it allows to reinforce the market position in retail banking, with a sound and quality balance sheet, while continuing supporting families and businesses in their financial needs’.
Positioning in the Spanish financial system
The combined entity will exceed 109 billion euros in total assets, becoming the fifth largest bank by assets in the Spanish market.
The new group reinforces its position in retail banking in Spain, with more than 4.5 million customers and substantial market shares in all key products: deposits (4.7%), loans (4.2%) and off-balance sheet items (3.3%).
The combined entity will be present in 80% of the national territory, being the best-in-class in Andalusia, Extremadura, Castilla y León, Castilla-La Mancha, Cantabria and Asturias and with capacity to compete in other markets such as Madrid, where the banks have a traditional presence. The will to maintain closeness and commitment to the regions and the confidence in service to customers shown by Unicaja Banco and Liberbank remain as part of the shared values.
Strategic sense of the transaction
The transaction constitutes a value creation project for customers and shareholders, improving the efficiency and profitability levels from a solid customer base, diversified both by sectors and geographically, with access to a single distribution platform and an enhance range of products and services.
The transaction will allow the combined entity to gain size to face in the best possible way the challenges of the industry, including those arising from the economic environment and the current interest rates, as well as the ongoing transformation and digitalization process. The combined entity is expected to reach recurring cost savings of approximately 192 million euros per year (in full from 2023), what will allow to significantly improve the cost-to-income ratio by 11 percentage points.
Leaders in balance sheet quality
The solid capital position of both entities prior to the transaction will allow to absorb the restructuring costs and to make important provisions in an accelerated way to increase the pace of NPA reduction. The fully loaded CET1 ratio of the Combine Entity will stand at 12.4%, the highest among the Spanish listed banks, substantially above -420 bp- regulatory requirements, and it is expected to increase with the migration to advanced capital models once the corresponding ECB authorizations are received.
Furthermore, after the additional provisions under the transaction, the combined entity is expected to have the highest NPA coverage in Spain (67%) and the second lowest NPL ratio among the listed companies (3.8%).
The generation of synergies will allow to increase the BPS of both entities by nearly 50% vis-à-vis market estimations for 2023.
Disclaimer
The information contained in this communication may not be used as the basis to enter into any contract or agreement and nothing herein constitutes an offer, invitation or recommendation to engage in investment in the shares, or any other financial instrument, of UnicajaBanco, S.A. (“UnicajaBanco”), especially in the United States, the United Kingdom, Canada, Japan, Australia or any other country where the purchase and sale of these shares is prohibited under applicable legislation. The distribution of this communication in certain jurisdictions may be restricted by law.
Consequently, persons to which this communication is distributed must inform themselves about and observe such restrictions. By receiving this presentation the recipient agrees to observe any such restrictions.
This communication may include forward-looking statements, projections, objectives, estimates and forecasts which have not been verified by an independent entity, and the accuracy, completeness or correctness thereof should not be relied upon. Forward looking statements, projections, objectives, estimates and forecasts are generally identifiable by the use of the words “may”, “will”, “should”, “plan”, “expect”, “anticipate”, “estimate”, “believe”, “intend”, “project”, or the negative of these words or other variations on these words or comparable terminology. All forecasts and other statements included in this communication that are not statements of historical fact, including, without limitation, those regarding the financial position, business strategy, management plans and objectives for future operations of Unicaja Banco (which term includes its subsidiaries and investees) and run-rate metrics, are forward-looking statements. These forward looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements of Unicaja Banco, or industry results, to be materially different from those expressed or implied by these forward-looking statements. These forward-looking statements are based on numerous assumptions regarding Unicaja Banco’s present and future business strategies and the environment in which Unicaja Banco expects to operate in the future, which may not be fulfilled. Due to such uncertainties and risks, recipients are cautioned not to place undue reliance on such forward looking statements as a prediction of actual results. All forward- looking statements and other statements herein are only as of the date of this communication.
None of Unicaja Banco nor any of its affiliates, advisors or representatives, nor any of their respective directors, officers, employees or agents, shall bear any liability for any loss arising from any use of this communication or its contents, or otherwise in connection herewith, and they do not undertake any obligation to provide the recipients with access to additional information or to update this communication or to correct any inaccuracies in the information contained or referred to herein. To the extent available, the industry and market data contained in this communication has come from official or third-party sources. Third-party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such data. In addition, certain of the industry and market data contained in this communication come from Unicaja Banco’s own internal research and estimates based on the knowledge and experience of Unicaja Banco’s management team in the market in which Unicaja Banco operates. Certain information contained herein is based on Unicaja Banco’s management team information and estimates and has not been audited or reviewed by Unicaja Banco’s auditors. Recipients should not place undue reliance on this information.
The financial information included herein has not been reviewed for accuracy or completeness and, as such, should not be relied upon. Certain financial and statistical information contained in the communication is subject to rounding adjustments. Accordingly, any discrepancies between the totals and the sums of the amounts listed are due to rounding.
Neither this presentation nor the historical performance of Unicaja Banco’s management team constitute a guarantee of the future performance of Unicaja Banco and there can be no assurance that Unicaja Banco’s management team will be successful in implementing the investment strategy of Unicaja Banco. In addition to the financial information prepared under IFRS, this presentation may include certain alternative performance measures (“APMs”) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority on 5 October 2015. An APM is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. Unicaja Banco believes that there are certain APMs, which are used by the Group’s management in making financial, operational and planning decisions, which provide useful financial information that should be considered in addition to the financial statements prepared in accordance with the accounting regulations that applies (IFRS EU), in assessing its performance. These APMs are consistent with the main indicators used by the community of analysts and investors in the capital markets.
The proposed transaction relates to the financial instruments of Unicaja Banco and Liberbank, S.A. (“Liberbank”), both companies incorporated in Spain. Information distributed in connection with the proposed transaction and the related shareholder vote is subject to Spanish disclosure requirements that are different from those of the United States. Financial statements and financial information included herein are prepared in accordance with Spanish accounting standards that may not be comparable to the financial statements or financial information of United States companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the U.S. federal securities laws in respect of the proposed transaction, since the companies are located in Spain and some or all of their officers and directors are residents of Spain. You may not be able to sue the companies or their officers or directors in a Spanish court for violations of the U.S. securities laws. Finally, it may be difficult to compel the companies and their affiliates to subject themselves to a U.S. court's judgment.
You should be aware that the companies may purchase shares otherwise than under the proposed transaction, such as in open market or privately negotiated purchases, at any time during the pendency of the proposed transaction.
The ordinary shares of Unicaja Banco have not been and are not intended to be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States of America except pursuant to an applicable exemption from the registration requirements of such Act.
