BBVA, Spain's second-largest bank, agreed to buy Compass Bancshares for $9.6 billion Friday, furthering the company's long-held ambition to grow in Spanish-speaking U.S. markets.
Compass shareholders have the option of selling their stock for 2.8 BBVA American Depositary Shares, or $71.82 in cash. The offer is a 16.1% premium over the U.S. bank's average share price in the last 10 days, Reuters reported.
BBVA’s purchase is a good fit with the bank’s strategy and “will compliment the bank’s business in the southern U.S.” according to Javier Bernat, a banking analyst at Caja Madrid Bolsa.
“The only drawback I can see in the short term is overexposure in the region … the bank should be mostly weighted in Spain or Europe,” Bernat told CNBC.com.
Compass closed on Thursday at $66.37. BBVA shares fell 3.9% on the news in early European trading.
"While this is within their stated strategy of U.S. expansion, the size of the deal is larger than some people would have anticipated. The take-out price is just under two times 2007 earnings or around 3.3 times book value. Clearly this looks expensive," a London-based trader told Reuters.
After the acquisition is complete, Compass will rank among the top 25 banks in the United States with about $47 billion in total assets, $32 billion in total loans and $33 billion in total deposits.
BBVA's Mexico-U.S. division includes Bancomer, Mexico's largest bank, as well smaller operations in Puerto Rico, California, Texas and Banco's U.S.-Mexico money transfer business. In June Banco Bilbao announced its acquisition of two Texas banks, to become the fourth-largest bank in the state.
The transaction has been approved by Compass' board and the relevant bodies of Banco Bilbao. The deal is expected to close in the second half of the year, subject to customary closing conditions including necessary bank regulatory approvals in the U.S. and Spain and the approval of the stockholders of both Compass and Banco Bilbao.
The cash-or-shares buy is BBVA's biggest ever acquisition. The company said it would issue shares worth 3.9 billion euros ($5.11 billion) to help fund it, Reuters reported.