Spain's state-owned lender Bankia (BNKXF 4.51) has announced an agreement to acquire Banco Mare Nostrum in an all-stock deal.
Bankia will issue new shares that will amount to 6.7% of its post-merger capital, and transfer the shares to shareholders of Banco Mare Nostrum. This values Banco Mare Nostrum at EUR825 million or 0.41 of the bank's book value.
Following the acquisition, Bankia will be the fourth largest lender in Spain. Bankia Chairman Jose Ignacio Goirigolzarri said the integration should create additional value and it will give Bankia a reach into markets where it previously had a limited presence. Earnings per share are expected to increase by about 16.0% after three years.
The acquisition follows a recent string of news related to troubled European banks. Banco Santander took over Banco Popular for EUR1 in early June after the European Central Bank warned that Banco Popular is likely to fail. Over the weekend, the Italian government agreed to spend as much as EUR17 billion to wind down Veneto Banca and Banca Popolare di Vincenza while transferring their good assets to Intesa Sanpaolo.
With sovereign yields remaining close to record lows and the European Central Bank maintaining ultra-loose monetary policy, it would not be a surprise to see the conditions be used for more transactions involving Italian or Spanish banks, as regulators push for greater stability in the system.