La Caixa gets 27% discount on Banca Cívica buyout

Yesterday La Caixa made their offer to buy out Banca Cívica, which was forced to merge in order to meet capital needs required by recent financial reforms.

Advisory boards on both sides approved the deal yesterday. The deal involves a buyout via share exchange. La Caixa's share price was discounted between 11.2% and 27%, depending on whether one compares the sale price to its book value or its IPO price.

The offer was 1.97 euros per share, which puts La Caixa's market value at 980 million euros. Negotiations were suspended throughout the entire trading session yesterday in order to avoid fluctuations of the share price. The price offered for La Caixa was 84% of book value, which was greater than what it had to accept for its IPO last summer when 45% of shares were sold to institutional investors and clients at a 73% discount.

Cívica shareholders participating in the deal should receive five shares of Caixabank (a financial subsidiary of La Caixa) for every eight shares purchased. Initially, they will take on losses of up to 27% if they refer to revenues taken in at their IPO. But experts point to a positive aspect: from this point forward the merged group will be more solvent, so potential for gains is stronger.

The deal ought to make Catalan savings bank Caixabank into the largest operating bank in Spain. Its share volume will be more than 342 billion euros, surpassing each BBVA, Santander and Bankia. Still, the ranking could vary during the next few months due to upcoming sale of CatalunyaCaixa and Banco de Valencia, which should occur before the summer, and the eventual sale of Novagalicia next autumn.