BBVA Gains Joint Control of Garanti Bank for $5.8 Billion

Added by Gary Dunn on November 3, 2010

Garanti Bank’s parent Dogus Group will now share control with Spanish bank BBVA after it purchased 24.9 per cent shares in Garanti Bank in a deal valued at $5.8bn.

This brings the combined stake of both entities in Garanti Bank to 49.8 per cent. GE, the seller, had announced intention to sell in February.

However, it struggled to find buyers due to the global recession. Despite the buy valued at discount of 10 per cent on Garanti Bank’s shares, analysts have indicated that Turkey can be too volatile and too risky for the Spain based bank, which has bulk of its foreign assets in USA and Latin America.

Investors remained unenthused with buyer’s share prices falling by 3 per cent after news of the deal spread. Garanti Bank’s share prices grew by 2.24 per cent.

BBVA intends to use money raised by a $7.1bn rights issue to fund this purchase and to bolster business in a stagnating Spanish economy. The risk taken by the bank is evident from the fact that it had to offer its shares at 29 per cent discount to make the rights issue a success.

The deal, shepherded by Morgan Stanley and Goldman Sachs, has reduced GE, which sold 18.6 per cent, to the status of a miniscule shareholder with just 6.3 capital hike. The remaining share of 6.3 per cent was purchased from Dogus Group.