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(Updates with chairman’s comments from fourth paragraph, updates shares in fifth.)
Oct. 10 (Bloomberg) -- Three of Banco Pastor SA’s biggest shareholders accepted a 1.35 billion-euro ($1.8 billion) bid from Banco Popular Espanol SA, which announced more provisions as real-estate losses continue to pummel Spain’s banks.
Investors accounting for 52.3 percent of Pastor stock approved the bid, including apparel billionaire Amancio Ortega and Fundacion Barrie, a charitable foundation with 42 percent of the stock. At least 75 percent of shareholders must accept for the deal to proceed, Popular said. Chairman Angel Ron said Popular would take a 1.5 billion-euro provision for future losses,valued at 1.1 billion euros after tax.
Pastor, a La Coruna, Spain-based lender with 31 billion euros in assets that traces its roots to 1776, was among five Spanish banks that failed stress tests in July after regulators found it didn’t have enough capital to withstand a recession. Spanish banks are merging to cut costs after taking 105 billion euros of provisions since 2008 to cover impairments that soared after the collapse of the nation’s debt-fueled property boom.
“This is a response to a crisis that is like a monster that changes each week,” Ron told reporters in Madrid, when asked about the new provision. “It’s a question of trying to take advantage of the opportunity the crisis gives us to create a better bank and prepare.”
Popular, which has 2,222 branches and 130 billion euros in assets, offered 1.115 new shares for each Pastor share and 30.9 new shares for each of its bonds mandatorily convertible into stock. At today’s stock price of 3.51 euros, Popular’s offer is valued at 3.91 euros per Pastor share. The deal represented a 31 percent premium over Pastor’s price at the levels the banks traded at before they were suspended on Oct. 7.
Popular’s offer for Pastor is 0.75 times book value and the deal will create a 15 percent return on investment by the third year, Ron said. The bank is still studying how many jobs will be lost with the merger and any cuts will be carried out via “natural means” and early retirements, he said.
Ron also said Popular would issue 700 million euros of bonds mandatorily convertible into shares. The deal is expected to be completed early next year.
Shares in Banco Pastor surged as much as 29.9 percent to 3.95 euros, easing to 3.68 euros at 3:39 p.m. in Madrid. Popular, the second-best-performing Spanish bank stock this year, fell 1.7 percent to 3.51 euros.
The deal will add to Popular’s earnings per share from “day one,” and the lender will maintain its payout to shareholders, Ron said. The transaction wasn’t directed by the Bank of Spain, he said in response to questions from analysts. Fundacion Barrie will own about 7 percent of the combined lender.
Pastor’s profit fell 38 percent in the first half of the year from the same period a year ago. The bank reported a ratio of defaults to total loans of 5.73 percent in June compared with 0.82 percent at the end of 2007. The bad-loan ratio at Popular was 5.58 percent in June.
The combination of the two commercial banks follows a dozen deals among savings banks that have cut their number to about 18 from 45. Banco Sabadell SA, another commercial lender, acquired Banco Guipuzcoano SA last year.
--With assistance by Todd White, Ben Sills and Charles Penty in Madrid. Editors: Keith Campbell, Steve Bailey.
To contact the reporter on this story: Emma Ross-Thomas in Madrid at firstname.lastname@example.org; Ben Sills in Madrid at email@example.com.
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