Spanish business guru Manuel Jove, founder of Spanish real state giant Fadesa, has announced a bid to acquire 5% of BBVA’s capital and become BBVA’s biggest single stock holder in what is considered the biggest transaction of its kind in the country. Jove has used as a funding tool for the first time in Spain tailor-made Luxembourg-listed structured convertible bonds from Swiss bank UBS.
In a statement to the Spanish regulator (CNMV) the Spanish businessman acknowledged, “an agreement with UBS Limited to acquire up to a 4.9% share-package of BBVA”.
The €3.2bn investment will see Jove put up just €500m in cash.
Jove has managed to avoid the hostility of previous bids: “The aim of the businessman is to get up to 5% of BBVA’s capital and he has applied to the Bank of Spain to avoid its opposition”, said the businessman’s statement. BBVA has also announced that Jove’s bid is welcomed by the bank as a financial and stable investment without any intent to intervene in the bank’s management. Jove has agreed to remain invested for the next five years, but will not join BBVA’s board of directors.
While UBS was unable to elaborate fully on this private deal, we do know that the structured bonds are of five years’ duration and have the BBVA share as an underlying. At maturity the bonds can either be executed at market value or converted into BBVA shares, though UBS has established complex conditions for this operation.
UBS said the major characteristic of the deal is the use of a structured product that offers a more attractive funding than a regular loan, while providing the investor with an option to leverage his position and derivatives that protect him from adverse market conditions in exchange for sacrificing part of his return.
UBS, which is one of the biggest wealth management companies in the world and has a strong structured products background, will benefit from hedging and issuing commission and from a funding rate of 3.2%-3.3%.
This is the third time such transactions have been used to finance share package acquisitions in Europe, since they allow investors to make big investments in listed companies without distorting its value on the stock-market. Previous transactions using structured bonds included Daimler Chrysler and Time Warner.
