- The stock price of Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México (NYSE: BSMX) has increased by over 20% during intraday trading. This is why it happened.
The stock price of Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México (NYSE: BSMX) has increased by over 20% during intraday trading. Investors are responding to Banco Santander SA (NYSE: SAN) planning to make a cash offer to buy out its Mexican subsidiary Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México for a total consideration of around 550 million euros ($647 million), according to a Dow Jones report via Morningstar.
The Spanish bank had announced today that the offer would target about 8.3% of its Mexican subsidiary’s share capital with the deal expected to be completed in the second or third quarter.
Santander currently owns 91.7% of Santander Mexico – which it plans to delist from the Mexican Stock Exchange. This move would require approval from at least 95% of Santander Mexico shareholders in an extraordinary shareholders’ meeting. The bank is expecting to pay 24 Mexican pesos (about $1.16) for every share of Santander Mexico, a 24.3% premium to the March 25 closing market price.
The deal is expected to drive Santander’s growth and capacity for generating capital, improving earnings per share by 0.8% in 2023. And the deal is also expected to have a return on invested capital of about 14%, reduce the group’s capital cushion it has to absorb future losses — known as the CET1 ratio — by about 8 basis points and be neutral in terms of tangible net asset value per share.
The company said it expects an underlying return on tangible equity of about 10% by the end of 2021 as its board plans on restoring a shareholder remuneration policy between 40% and 50% of group underlying profit.
“It is also consistent with the bank’s strategy to deploy capital in high growth markets. Mexico is a core market for the group with attractive long-term fundamentals.”
— Banco Santander SA in a company statement
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