30th Mar 2005 14:00
Banco Bilbao Vizcaya Argentaria SA30 March 2005 NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES OR OTHER EXCLUDED STATES Following yesterday's press releases, in which BBVA described the terms of itspublic voluntary exchange offer (the "Offer") for the entire ordinary sharecapital of Banca Nazionale del Lavoro S.p.A. ("BNL" or the "Bank") and confirmedthe filing with CONSOB of a tender offer document, in accordance with art. 102of Testo Unico dell'Intermediazione Finanziaria and art. 37 of RegolamentoCONSOB sugli emittenti, BBVA hereby discloses the synergies expected from theimplementation of its industrial plan for BNL and their impact on BBVA'sfuture earnings per share, elements supporting the strategic rationale of theOffer. The initiatives envisaged by BBVA's industrial plan with regards to BNL's retailnetwork aim at strengthening and increasing the effectiveness of such networkthrough the rationalisation of the territorial intermediate structure and theimplementation of more effective management processes. The integration of thewholesale banking activities will generate significant economies of scale andwill benefit from the complementarity of BBVA and BNL in this area, leveragingon the relationships built with the customer base. As a result of suchinitiatives, pre-tax revenue synergies (net of restructuring costs) are expectedto reach €14 million in 2005, €71 million in 2006 and €89 million in 2007 (or2.6% of the expected BNL's expected total income, based on selected analystestimates). Investments required to achieve such synergies are estimated atapprox. €135 million. BBVA's industrial plan also envisages the continuation of the cost reductionpolicies already started by BNL's current management. Initiatives in this areawill involve both the network personnel, which will be refocused also throughtraining and repositioning toward more service-oriented and front-officeactivities, and, more importantly, the central and territorial intermediatestructures. The procurement of goods and services will be integrated within theBBVA organisation, with an expected increase in purchasing power and a reductionin costs. As a result of such initiatives, pre-tax cost savings are expected toreach €46 million in 2005, €130 million in 2006 and €193 million in 2007 (or10.2% of the expected operating costs, based on selected analyst estimates).Investments required to achieve such synergies are estimated at approx. €255million. Finally, BBVA plans to share its systems, processes and expertise with BNL inthe areas of IT and risk management. With regards to risk management, BBVA'splan envisages an optimisation of the processes through the restructuring of theorganisation and the introduction of new rules and procedures. In particular,BBVA will review the lending procedures to ensure a more thorough assessment anda more rapid response to clients' loan requests. For this purpose, newstructures and procedures will be implemented at the network level, with newscoring and rating tools. The new lending model is expected to reduce, oncefully implemented, the loan loss charge level to 0.39%, a level in line with the0.29% currently achieved by BBVA in Spain. In terms of the existing NPL portfolio, provisioning will be increased - withinthe BBVA consolidated financials - by • 845 million, raising the coverage ratio(calculated taking into account BNL provisions as well as the aforementioned •845 million within the BBVA balance sheet) to around 90%. The loan recoveryactivity will be significantly reviewed to reflect BBVA's approach in themarkets where it is present, setting up a dedicated business unit with specificexpertise, training and incentive mechanisms as well as a new IT platform. Total pre-tax synergies expected from the implementation of the business planamount to • 60 million in 2005, • 201 million in 2006 and • 282 million in 2007. Based on BBVA EPS as per consensus IBES estimates, BNL EPS as per selectedanalyst estimates and the synergies described above, the transaction isestimated to be neutral on BBVA earnings per share in 2005 and accretive in 2006and 2007 by 1.2% and 2.1% respectively. Attached to this press release are the Presentation to the Analysts and the Notefor the Press. All information needed by BNL shareholders in order to reach a decision on theoffer will be included in the Offering Document, which will be published oncethe authorization by Consob is received. Excluded markets The Offer is exclusively promoted on the Italian market, the sole regulatedmarket on which the Shares are negotiated. The Offer is not being made and willnot be made in or into the United States and in any other State in which suchdistribution is subject to restrictions or limitations pursuant to laws in forcein such states (the "Excluded States"). Excluded States are without limitationsUnited States of America, Japan, Canada and Australia. This document, and anyand all materials related to the Offer, that the Issuer or the Offeror and anyother person interested in the Offer may issue, should not be sent or otherwisedistributed in or into the United States and in the Excluded States, whether byuse of the United States of the Excluded States mail or by any means orinstrumentality of United States or of the Excluded States interstate or foreigncommerce (including, but without limitation, the mail, facsimile transmission,telex, telephone and the Internet) or any facility of a United States nationalsecurities exchange or Excluded States, and the Offer cannot be accepted by anysuch use, means or instrumentality, in or from within the United States orExcluded States. Accordingly, copies of this document, the Offer Document andany related materials are not being, and must not be, sent or otherwisedistributed in or into or from the United States and Excluded States or, intheir capacities as such, to custodians, trustees or nominees holding BNL Sharesfor United States and Excluded States, and persons receiving any such documents(including custodians, nominees and trustees) must not distribute or send themin, into or from the United States and Excluded States. Any purportedacceptance of the Offer resulting directly or indirectly from a violation ofthese restrictions will be invalid. No BNL Shares are being solicited from aresident of the United States and Excluded States and, if sent in response by aresident of the United States and Excluded States, will not be accepted. This document is not an offer to sell, or the solicitation of an offer to buy,securities in the United States and Excluded States. The BBVA Shares beingoffered in exchange for BNL shares have not been and will not be registeredunder the United States Securities Act of 1933 (the "US Securities Act") orunder the securities laws of any state of the United States and Excluded States,and are offered solely outside the United States and Excluded States in offshoretransactions in compliance with Regulation S under the US Securities Act.Consequently, no BBVA Shares delivered in exchange for BNL Shares pursuant tothe Offer may be offered, sold or delivered directly or indirectly in the UnitedStates and Excluded States, except pursuant to an exemption from registration 30 March 2005 PRESS RELEASE BBVA Launches a Public Tender Offer for 85.25% of BNL • The deal, valued at €6.469 billion, creates value starting the first year an is the natural sep for BBVA in Italy • BBVA is offering one share of BBVA for every five ordinary shares of BNL, representing a premium of 17% over BNL's last month's average share price • BNL is the sixth Italian bank in terms of credits and deposits and a great platfform for worth for BBVA. BBVA announced yesterday its Board of Directors has approved the launch of apublic tender offer for 85.23% of Banca Nazionale del Lavoro SpA (BNL), with theobjective of increasing its ownership from the current 14.75% to 100%. BBVA isoffering one ordinary share of BBVA for every five ordinary shares of BNL,valuing BNL at €2.52 per share, according to March 18th's stock price. The deal,valued at €6.469 billion, representing a premium of 17% over BNL's last month'saverage share price and 29% over the last six months. With this offer, BBVA strengthens its presence in Italy, one of the mostattractive banking markets in Europe. BBVA has been present in Italy since 1998as the main shareholder of BNL following its privatization. BNL represents anexcellent platform for BBVA to expand in the Italian market given its strongbrand name recognition and its growth potential. The structure of the transaction (100% in stock) allows BNL's currentshareholders to participate in this project becoming shareholders of BBVA, oneof the most profitable banks in Europe with a leading franchise in high returnmarkets such as Spain and Latin America, and a solid track record of valuecreation. Last year BBVA was the best performing European bank, with a 19.2%rise. The transaction is a natural step in BBVA's international expansion strategy,and will contribute to diversify its sources of growth and geographical exposureas well as to create value for its shareholders. With this offer, BBVAconsolidates its presence in the Italian market, where the bank sees substantialpotential for profitable growth. The offer, in which Goldman Sachs, Merrill Lynch and Morgan Stanley are actingas lead financial advisors has been communicated to the relevant Italian andSpanish regulatory authorities and is subject to customary approvals. The offeris also subject to BBVA General Shareholder Meeting approval of the neededcapital increase to issue new shares, to be offered as payment in thetransaction. Once approved, a period of acceptance is opened for those BNL shareholderswilling to accept the offer. BBVA expects the transaction to be fully completedby Q3 this year. The completion of the offer is conditioned, among other things, to theacceptance of the deal by a number of BNL shares that, added to BBVA's shares,would represent more that 50% of the Authorized Ordinary Share Capital of BNL. Following the tender offer, and subject to applicable regulatory requirements,BBVA has the intention to delist BNL's shares from the Italian Stock Exchange. Value creation The transaction is expected to create value for BBVA shareholders and, in termsof EPS, it will have a neutral impact in 2005 and a positive impact already in2006. It also will allow to significantly accelerate BNL's expansion and it willresult in the realization of significant synergies, both in terms of income(2.6%) and costs (10.2% of the expected operating costs for 2007). (1) The financing structure of the transaction (capital increase and shareexchange) will allow BBVA to preserve its capital ratios in today's levels. Oncethe deal is closed, BNL's commercial banking business will represent up to 18%of the Economic Capital of the new BBVA, depending on the level of acceptance. A platform for growth This transaction is the next natural step for BBVA in the Italian market andfits with the banks strategic commitment to profitable growth and valuecreation. BBVA has been present in Italy since 1998 when it acquired 10% of BNL in thecontext of its privatization. In 2001 BBVA increased its interest in BNL to14.7%. Following a change in BNL's management team, the bank startedimplementing a new business plan in 2003 focused on improving its commercialeffectiveness and efficiency. As part of that plan and in order to comply withIAS rules, BNL undertook a €1,200 million capital increase in November 2004,which BBVA fully subscribed. Since 1998, BBVA has developed an in-depth knowledge of the Italian bankingsystem, which combined with its commercial and operational know-how, will allowBBVA to develop its growth capacities and its efficiency levels. With a GDP of US$ 1,678 billion and a population of more than 58 million, Italyis the fourth largest economy in the EU. Italy is also one of the largestbanking markets in Europe and has a significant growth potential given: (i) the low penetration of banking products relative to other EU countries (87% of loans over GDP versus an average of 121% for EU15; and 14% of mortgages over GDP versus an average of 48% for EU15), (ii) the high margins of banking products (2.56% net interest margin) (iii) the potential for efficiency improvements (65% efficiency ratio versus 54% in Spain) and (iv) the market fragmentation and ongoing consolidation process. BNL is the sixth largest Italian bank both by loans and deposits, and enjoys astrong brand awareness and image (4th Italian bank in top of mind and notoriety)as well as a solid corporate banking franchise. The bank strategy is focused onexpanding its domestic retail and corporate franchise and is already yieldingpositive results. Total retail and corporate loans grew 12.7% and 8.7%respectively in 2004, supported by strong growth of new production in particularin mortgages (26.7%) and personal lending (5.6%). With this acquisition BBVA will become the seventh largest bank in Europe andthe third largest in the Eurozone by market capitalization, with total assets of€390 billion as of December 2004 (proforma), and a diversified retail franchisewith a leading position in countries as Spain and Latin America and significantgrowth prospects in Italy and the Hispanic market in the US. The Group hasrecently started to operate in the US, focusing on the Hispanic market, with theacquisitions of Valley Bank in California and Laredo National in Texas. BBVA had6,848 branches (of which 3,375 in Spain) and 84,117 employees (of which 30,765in Spain) as of December 2004. All information needed by BNL shareholders in order to reach a decision on theoffer will be included in the Offering Document, which will be published oncethe authorization by Consob is received. Excluded markets The Offer is exclusively promoted on the Italian market, the sole regulatedmarket on which the Shares are negotiated. The Offer is not being made and willnot be made in or into the United States and in any other State in which suchdistribution is subject to restrictions or limitations pursuant to laws in forcein such states (the "Excluded States"). Excluded States are without limitationsUnited States of America, Japan, Canada and Australia. This document, and anyand all materials related to the Offer, that the Issuer or the Offeror and anyother person interested in the Offer may issue, should not be sent or otherwisedistributed in or into the United States and in the Excluded States, whether byuse of the United States of the Excluded States mail or by any means orinstrumentality of United States or of the Excluded States interstate or foreigncommerce (including, but without limitation, the mail, facsimile transmission,telex, telephone and the Internet) or any facility of a United States nationalsecurities exchange or Excluded States, and the Offer cannot be accepted by anysuch use, means or instrumentality, in or from within the United States orExcluded States. Accordingly, copies of this document, the Offer Document andany related materials are not being, and must not be, sent or otherwisedistributed in or into or from the United States and Excluded States or, intheir capacities as such, to custodians, trustees or nominees holding BNL Sharesfor United States and Excluded States, and persons receiving any such documents(including custodians, nominees and trustees) must not distribute or send themin, into or from the United States and Excluded States. Any purportedacceptance of the Offer resulting directly or indirectly from a violation ofthese restrictions will be invalid. No BNL Shares are being solicited from aresident of the United States and Excluded States and, if sent in response by aresident of the United States and Excluded States, will not be accepted. This document is not an offer to sell, or the solicitation of an offer to buy,securities in the United States and Excluded States. The BBVA Shares beingoffered in exchange for BNL shares have not been and will not be registeredunder the United States Securities Act of 1933 (the "US Securities Act") orunder the securities laws of any state of the United States and Excluded States,and are offered solely outside the United States and Excluded States in offshoretransactions in compliance with Regulation S under the US Securities Act.Consequently, no BBVA Shares delivered in exchange for BNL Shares pursuant tothe Offer may be offered, sold or delivered directly or indirectly in the UnitedStates and Excluded States, except pursuant to an exemption from registration. -------------------------- (1) BBVA earnings per share as per consensus IBES estimates, BNL earnings pershare as per selected analyst estimates have been uses to reach these figures.Regarding expected total income and expected operating costs for BNL are basedon a selected analysts estimates. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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