Spanish banking giant Caixabank has valued Bankia at €4.3 billion within an all-in share deal that will create the biggest Spanish domestic bank, with total assets of over €664 billion.

Within a joint statement on Friday, both banks said they predict annual cost synergies of approximately €770 million achieved by 2023, and new annual revenues of €290 million over five years, Reuters reports.

The banks stated: “The current pandemic, along with other structural challenges faced by eurozone banks (digital transformation, low profitability in the climate of interest rates described, etc), make the proposed CaixaBank and Bankia merger a strategic opportunity for both entities.” 

They added that the acquisition “will enable reaching a greater number of clients with an optimised cost structure and allow the two entities to jointly make digital transformation investments, which will allow making new investments in a more efficient manner.” 

Lenders will have a combined valuation of over €16 billion.

Analysts are forecasting more tie-ups in a bid to reduce costs as banks throughout Europe struggle with all-time low interest rates and the economic downturn due to the coronavirus crisis.

Although described as a merger, the deal is a takeover by Caixabank, being nearly three times the size of Bankia in regard to market value and almost twice the size in terms of assets.

The agreement is made up of an exchange ratio of 0.6845 new Caixabank ordinary shares for every Bankia share, including a 20% premium over the exchange ratio at the September 3 closing, before news was announced regarding the deal, lenders stated.

Furthermore, it represents a premium of 28% above the average exchange ratio of the past three months.

Bankia’s valuation is just under the €4.4 billion as at the closing price on Thursday.

When news of the merger first came about, Bankia shares have increased around 39%, and Caixabank has gained 14%.
Under the deal’s terms, Caixabank shareholders will initially represent 74.2% of the capital of the new bank, whilst Bankia will hold 25.8%.
CaixaBank’s chief executive Gonzalo Gortázar will become the chief executive of the new entity, with Bankia chairman José Ignacio Goirigolzarri as the chair, reports the Financial Times.