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Caixabank and Bankia will form a megabank to become the leading bank in Spain. The details of the deal include the approval of Caixabank shares to Bankia shares at an exchange rate of 0.6845
Caixabank and Bankia are on the brink of forming a megabank to become the leading bank in Spain following the approval of the merger plan by the board of directors of both entities. According to the report, the Caixabank brand will be maintained, and the new entity will seek to add value to customers, play a vital role in the recovery of Spain’s economy as well as improve profitability for the shareholders.
The new entity will have a balanced territorial presence equipped with resources and have the capacity to match the challenges of the banking industry.
The details of the operation include the approval of Caixabank shares to Bankia shares at an exchange rate of 0.6845.
Details of Caixabank and Bankia Merge Deal
Also, there was an agreed decision of including a 20% premium over the exchange ratio to the agreed price by 3rd September 2020. Based on the total number of Bankia shares available to be exchanged, there will have to be around 2 billion of the Caixabank ordinary shares to match the merger exchange amount with a nominal value of 1 euro each.
The New entity will see the Caixabank shareholders representing 72.4% of the capital with Bankia representing 25.8%. José Ignacio Goirigolzarri, the current chairman of Bankia will chair the new entity upon the appointment of the new board of directors of Caixabank.
Gonzalo Gortázar, the current CEO of Caixabank will also be the Chief Executive Officer of the new entity reporting directly to the board of directors. Spain’s new entity will have over €664 billion combined total assets to become the largest domestic bank. In terms of revenue generation, there will be a massive figure following the renegotiation of the agreement by Bankia in the insurance sector. Due to the significant increase in the customer base, there will be an offering of better quality services and products.
The new entity is expected to generate a revenue of €290 million per annum over a period of 5-years.
The newly formed bank will have a presence in 2200 municipalities as they become the only entity to operate in 290 of them. Also, the estimated point will achieve an annual recurring cost savings of €770 million as claimed by the statement released by the Bankia. This will go a long way to increase the cost-to-income ratio to a very competitive level.
According to Goirigolzarri, the new entity becoming the leading bank in the country is very essential especially when it has a significant size and has the capacity to support families and companies and to ensure that the strength of the financial system is reinforced. Interestingly, the capacity to absorb valuation adjustment and restructuring costs will be provided by the solid equity position of Caixabank and Bankia.