BBVA, the Spanish bank, has launched a €2bn bid for the 50.15 per cent of Garanti, Turkey’s biggest bank by market capitalisation, that it does not already own, using funds from its own recent sale of US assets.
The acquisition price of TL25.7bn (€2.25bn) represents a 34 per cent premium on the average price of Garanti shares over the past six months and is BBVA’s most recent proposed use of funds from $11.6bn it netted from selling its US assets to PNC this year.
“The sale of the US subsidiary provides us with strategic optionality to, among other things, invest the excess capital in our main markets,” said Onur Genc, BBVA chief executive, who came originally from Garanti.
BBVA is carrying out a €3.5 share buyback plan of up to 10 per cent of its shares, one of the largest in Europe.
The Garanti purchase takes place against the slide in value of the Turkish lira, whose purchasing power in euros has tumbled to about a quarter of what it was in November 2014, when BBVA agreed to pay €2bn for a 14.89 stake in Garanti, a transaction that was completed in 2015.
“The price is very attractive for Garanti BBVA minority shareholders,” said Carlos Torres, BBVA’s executive chair. “Turkey is a strategic market for us and, despite the short-term volatility, has great potential.”
Garanti, which has more than 21,000 employees and 1,000 branches, says it is the most profitable bank in the country, with return on equity of 19.3 per cent and a non-performing loan ratio of 4 per cent.
BBVA has held control of Garanti’s board since 2015. It agreed to increase its stake to 49.85 per cent in 2017.
The latest proposed transaction, which BBVA expects to be completed in the first quarter of next year after regulatory approvals, would boost the Spanish lender’s profits by fully consolidating those of Garanti.
BBVA said the transaction would increase profit per share by 13.7 per cent in 2022.
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