Op-ed: An exemplar deal

La Caixa unveiled yesterday its offer to buy Banca Cívica for a billion euros. This is an 11% discount on its current book value and 30% less than its IPO price. The deal is going to go through without any external funding or aid.

It is certainly true that La Caixa is going to buy Banca Cívica for a really low price, which exemplifies the tough situation that the Spanish financial sector is enduring at this time. CaixaBank, headed by Isidre Fainé, acquired Banca Cívica (created from Caja Navarra, Cajasol, Canarias y Municipal de Burgo) and totals to 342 billion euros in stock value. For now, it is the biggest financial institution operating in Spain by share volume.

Deals expected to take place during the next several months (Catalunya Caixa and Banco de Valencia will be put up for sale before summer and Novagalicia in autumn) could alter the rankings. The coming together of Banca Cívica and La Caixa is the fourth merger to occur after Spain enacted recent financial reforms and the second to occur without bailout money. The financial reform requirements were what led leaders of the banks under the Banca Cívica umbrella to consider the La Caixa deal in the first place.

Banca Cívica and its co-presidents Pulido and Goñi were faced with few options besides nationalization and the La Caixa buyout. Fainé conducted the deal quickly and soundly, ensuring that the process was not complicated by political issues. In this case, a situation born out of uncertainty turned out to be an exemplar deal.