Goldman sachs calculate that CaixaBank will pay a maximum of 1.63 euros for each share of Bankia if both entities finally agree to their merger through a share exchange. The figure of 1.63 euros represents a 20% premium on Bankia's current market price, although it is still below its annual maximum of 1.99 euros.
The US bank has established a very wide price range to value the possible transaction, ranging from 1.22 euros in the lowest case up to the aforementioned 1.63 euros. The 1.22 euros means applying to Bankia a ratio P / TBV (price over tangible book value) of 0.3 times, while the 1.63 euros imply a 0.4 times P / TBV.
Goldman considers that the exchange equation that is finally established will be key to assessing the final financial result, cost synergies and benefits of the future entity. For its analysts, the logic of the operation lies in several factors, such as the potential for a significant reduction in operating costs and substantial creation of goodwill, which can substantially limit dilution for future profits.
In general, your scenario analysis shows a variety of financial results, from a 20% increase in EPS (Earnings Per Share), which would create an 8% ROTE; up to a 4% BPA dilution, with a 6% ROTE, with cost synergies that can range from 25% to 50%.
"The internal nature of the merger certainly suggests that synergies may be significant.. However, we see that the target entity is currently 62% owned by the Spanish government, "says Goldman. Therefore," the discussion on the potential for cost reduction could include political considerations, including limiting the scope or timing of cost synergies, "adds the American bank.
"In other words," their experts conclude, "the broader socioeconomic perspective could represent an important consideration when ambition is calibrated for cost synergies. "
As has been published by Bolsamanía, the generation of capital through goodwill It is one of the financial keys of the operation. "The 'creation' of capital is due to the goodwill that materializes with the acquisition at a P / TBV ratio of less than one," Goldman explains.
Bankia is currently listed with a 65% discount compared to your expected 2020 TBV. Assuming that the transaction was carried out at current market values, the Bankia buyer would pay the current market value (about 4,200 million euros) to acquire its entire capital base (about 12,500 million euros).
After the transaction is completed, this difference in € 8,400 million could be recognized as a gain in the profit and loss account. In their opinion, this gain could, "for accounting purposes, accrue to the retained earnings component of capital and, therefore, account for tangible capital as well as CET1 capital".
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