The weaker Turkish lira has reduced the price of the BBVA deal to buy 50.15% of Turkish lender Garanti (GARAN.IS) by more than 400 million euros at current exchange rates, the chief executive officer of Spain’s BBVA (BBVA.MC) said on November 29.
Recently, BBVA, which already owns part of Garanti, offered to buy the remaining stake in the lender in a deal that at the time was worth up to 2.25 billion euros ($2.54 billion).
As the deals had been structured in liras, it would now cost around 1.8 billion euros and capital consumption would be around 1.1 billion euros, down from the 1.4 billion euros initially estimated, according to the CEO Onur Genc. He mentioned:
“The currency devaluation helps us, so we are going to buy 50% of the bank if we can for 1.8 billion euros in cash after 10 days (of a slide in the Turkish lira).”
On November 19, the deal, which is expected to close in the first quarter of 2022, was announced and established a maximum price of 25.697 billion Turkish lira ($2.03 billion) or 12.20 lira per share, should all Garanti BBVA shareholders sell their shares. Genc added:
“That entry price has improved, and has been improving every single day.”
As the bank already consolidates all of Garanti’s risk-weighted assets but not all of its equity, capital consumption is lower than the price of the acquisition.
Genc was still aware of the short-term risks and macroeconomic uncertainty in Turkey.
After President Recep Tayyip Erdogan defended his low-rates policy despite widespread criticism, the Turkish lira slid as much as 4.6% against the dollar on Monday, nearing record lows touched last week.
Mainly, analysts agree the deal makes sense from a financial point of view, but many highlight macroeconomic risks were anticipating BBVA to increase its presence in Spain to counter-balance its exposure to emerging markets.
Genc, when asked about resuming merger talks with Spanish lender Sabadell (SABE.MC), said that Spain was BBVA’s “home market” where the bank wanted to grow organically.
Regarding Sabadell, he said:
“There is nothing new to add.”
However, he insisted that the bank, as in other jurisdictions, would analyze opportunities in case they added shareholder value.
($1 = 0.8861 euros)
($1 = 12.6679 liras)
