BBVA to jointly run Garanti Bank in $5.8 billion deal

By Sonya Dowsett

MADRID (BestGrowthStock) – Spanish bank BBVA (BBVA.MC: ) has bought joint control of Turkish peer Garanti Bank (GARAN.IS: ) in a $5.8 billion deal to escape a price war for deposits and high funding costs in its sluggish home economy.

“BBVA wants to be in markets with the best potential for growth and Turkey, through a leader bank like Garanti, is undoubtedly one of those,” BBVA chairman Francisco Gonzalez said in a statement.

With funding from a $7.1 billion capital hike announced on Tuesday, BBVA is buying a 24.9 percent stake in Garanti, giving it joint control with Garanti parent Dogus Group.

Dogus and BBVA will jointly run Garanti with a combined stakeholding of 49.8 percent, BBVA said on Tuesday. Analysts had said a controlling stake for BBVA was essential for the success of any deal.

Shares in BBVA fell 3 percent to trade at 8.8 euros per share at market open on Tuesday. Garanti Bank was 2.24 percent higher at 9.1 Turkish lira.

GE first announced in February it wanted to sell its stake in Garanti, viewed as one of Turkey’s best-run banks, but had a hard time finding a buyer as banks struggled in the wake of the financial crisis.

Analysts have questioned the logic behind a move into Turkey by BBVA, the bulk of whose investments outside Spain lie in Latin America and the United States.

Although the Turkish economy is growing fast, it is volatile, and may be viewed as risky by the market at a time when the bank is fighting a stagnant economy at home in Spain.

The deal comprises a payment of 4.2 billion euros and 8 Turkish lira per share, implying a 10 percent discount to the average price of Garanti shares over the past week.

BBVA will buy a 18.6 percent stake in Garanti from General Electric, leaving GE as a minority stakeholder in the bank, and a 6.3 percent stake from Dogus.

BBVA said the 5.1 billion euro rights issue was to improve its financial structure, and the funds could be used toward the Turkish buy. The rights issue will be 1 for 5, with an issue price of 6.75 euros per share, representing a 29 percent discount on Friday’s closing price.

The bank did not say how much of the funds would be used to pay for the Garanti stake buy and how much would be used to bolster capital.

Morgan Stanley and Goldman Sachs will act as joint global coordinators and bookrunners for the rights issue.

(Reporting by Sonya Dowsett; Editing by David Cowell)

BBVA to jointly run Garanti Bank in $5.8 billion deal