BBVA sells US subsidiary to PNC for $11.6B
BBVA has agreed to sell to PNC its subsidiary in the US for $11.6 billion in cash, an amount that represents 19.7 times the unit’s 2019 earnings, and that is almost 50% of BBVA’s current market capitalization, creating significant value for shareholders.
“This is a very positive transaction for all sides. PNC has recognized the great value of our unique client franchise and of our great team in the US, who will be part of a leading financial services group in the country. The deal enhances our already strong financial position. We will have ample flexibility to profitably deploy capital in our markets strengthening our long-term growth profile and supporting economies in the recovery phase, and to increase distributions to shareholders.” – BVA Group executive chairman Carlos Torres Vila.
In the US, BBVA is a Sunbelt-based bank with more than $100 billion in assets and 637 branches, with market shares in Texas, Alabama and Arizona. After the closing of the transaction, PNC, based in Pittsburgh, Pennsylvania, will become the country’s fifth-largest bank by assets. The transaction excludes the broker dealer (BBVA Securities) and the branch in New York, through which BBVA will continue to provide corporate & investment banking services to its large corporate and institutional clients. It also excludes the representative office in San Francisco and the fintech investment fund Propel Venture Partners.
“Our acquisition will accelerate our growth trajectory and drive long-term shareholder value. This transaction is an opportunity to navigate our future from a position of strength, accelerating PNC’s expansion while drawing on our experience as a disciplined acquirer. We are excited to bring our industry-leading technology and innovative products and services to new markets and clients, leveraging our mutual commitment to building diverse and high performing teams and supporting the communities we serve.” – William S. Demchak, PNC’s chairman, president and chief executive officer.
The all-cash deal by PNC values the business sold at 19.7 times its 2019 earnings and 1.34 times its tangible book value as of September, 2020. Additionally, the deal unlocks hidden value as the price is more than 2.5 times the average valuation assigned by analysts to the business, for a business that represented less than 10%³ of FY2019 Group’s net attributable profit. Also the price represents almost 50% of BBVA’s current market capitalization.
The deal is expected to close in mid 2021 once the required regulatory approvals have been obtained. J.P. Morgan Securities plc served as exclusive financial advisor to BBVA, and Sullivan & Cromwell LLP served as legal advisor. Bank of America, Citi, Evercore and PNC Financial Institutions Advisory acted as financial advisers to PNC and Wachtell, Lipton, Rosen & Katz was legal counsel.
