European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

Liberbank (LBK SM) - Unicaja (UNI SM) Second Time Around

Liberbank (LBK SM): Running to Stand Still

Event-Driven

On 29 December, the Boards of <a href="https://www.smartkarma.com/entities/unicaja-banco-sa" target="_blank" data-smartkarma-citation="entities:28379:1" rel="noopener">Unicaja Banco SA (UNI SM)</a> and <a href="https://www.smartkarma.com/entities/liberbank-sa" target="_blank" data-smartkarma-citation="entities:21279:1" rel="noopener">Liberbank SA (LBK SM)</a> approved at last the merger of both entities. Unicaja, which will absorb Liberbank, will control 59.5% of the resulting entity, while Liberbank will have the remaining 40.5%. On 30 December, the deal presentation took place.
Unicaja + Liberbank will have combined assets pro-forma over €108.9 bn and will become the fifth biggest bank operating in Spain.
The exchange ratio is 0.360845 Unicaja shares per Liberbank share.
<ul>
<li>0.24x implied equity value/BV, 10.4x deal value/EPS (trailing four quarters) and 24.8x deal value/tangible equity upon announcement (25.0x last close).</li>
</ul>
Cost savings are the cornerstone of the project. Unicaja and Liberbank plan to close up to 20% of the branch network. The combined entity expects to have recurring cost savings of approximately €192 mn per year (fully from 2023), which will allow a "significant" improvement in the efficiency ratio by 11 percentage points. The generation of synergies will make it possible to increase EPS by approximately 50% compared to 2023 analysts' estimates.
<ul>
<li>Restructuring costs could reach around €400-500 mn. But now the banks have a stronger capital position to face them. Unicaja's top quality capital ratio is 14.4% and Liberbank's is 14%. Both entities could use their excess capital from 11.5% to increase provisions and improve their coverage rates.</li>
</ul>
This merger has all the chances to succeed, and should close in six to seven months. According to market consensus, it is a win-win textbook operation.
Following the recent drop in the share price of Liberbank, the gross spread is -2.3%. 
Recommendation is Long 1.0 Liberbank/short 0.360845 Unicaja shares.

On 29 December, the Boards of Unicaja Banco SA (UNI SM) and Liberbank SA (LBK SM) approved at last the merger of both entities. Unicaja, which will absorb Liberbank, will control 59.5% of the resulting entity, while Liberbank will have the remaining 40.5%. On 30 December, the deal presentation took place.
Unicaja + Liberbank will have combined assets pro-forma over €108.9 bn and will become the fifth biggest bank operating in Spain.
The exchange ratio is 0.360845 Unicaja shares per Liberbank share.

0.24x implied equity value/BV, 10.4x deal value/EPS (trailing four quarters) and 24.8x deal value/tangible equity upon announcement (25.0x last close).

Cost savings are the cornerstone of the project. Unicaja and Liberbank plan to close up to 20% of the branch network. The combined entity expects to have recurring cost savings of approximately €192 mn per year (fully from 2023), which will allow a "significant" improvement in the efficiency ratio by 11 percentage points. The generation of synergies will make it possible to increase EPS by approximately 50% compared to 2023 analysts' estimates.

Restructuring costs could reach around €400-500 mn. But now the banks have a stronger capital position to face them. Unicaja's top quality capital ratio is 14.4% and Liberbank's is 14%. Both entities could use their excess capital from 11.5% to increase provisions and improve their coverage rates.

This merger has all the chances to succeed, and should close in six to seven months. According to market consensus, it is a win-win textbook operation.
Following the recent drop in the share price of Liberbank, the gross spread is -2.3%. 
Recommendation is Long 1.0 Liberbank/short 0.360845 Unicaja shares.

Liberbank SA

Liberbank - Unicaja Agreed Merger