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Banco Santander Looks to Take Over Mexican Subsidiary -- Update

04/12/2019 | 02:28am

--The Spanish bank is looking to acquire roughly 25% of Santander Mexico's share capital

--The exchange offer is expected to be launched and settled in the second half of the year

--Santander Mexico holders that accept the offer would receive Santander Group dividends from October

By Anthony Shevlin

Spain's Banco Santander intends to make an offer for all the shares it doesn't already hold in its Mexico subsidiary, as part of the company's overall strategy to deploy more capital in Latin America.

The Spanish bank said Friday that the offer for Banco Santander SA Institucion de Banca Multiple Grupo Financiero Santander Mexico (BSMX.MX) would be for up to approximately 25% of the subsidiary's share capital.

Santander expects the deal--which it described as a "low-risk" way to improve its growth profile--will positively contribute to the group's CET1 ratio, be neutral on earnings per share and have a return on investment of around 14.5%.

"The offer will be voluntary and, therefore, minority shareholders of Santander Mexico may choose whether or not to participate in the transaction, which will not be subject to a minimum acceptance level," the bank said.

If all shares held by minority shareholders in Santander Mexico are tendered in the offer, the Spanish bank would have to issue around 572 million shares at the currently expected consideration, which it says represents 3.5% of its current share capital.

"Santander Mexico holders that accept the offer will receive Santander Group dividends starting in October 2019," the Spanish bank said.

Shareholders who accept the offer at the expected consideration would receive 0.337 newly issued shares of Banco Santander for every share of Santander Mexico, as well as 1.685 American Depository Shares of Banco Santander for every ADS of Santander Mexico.

The exchange ratio implies a 14% premium based on the closing price of both banks' shares on April 11, or 22% based on the past month's volume weighted average price, the bank said.

The exchange offer is expected to be launched and settled in the second half of the year.

Santander doesn't intend to seek to delist Santander Mexico from either the Mexican or New York stock exchanges.

Write to Anthony Shevlin at; @anthony_shevlin

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