By Jesús Aguado
MADRID, Feb 4 (Reuters) – Santander shares fell as much as 5% on Wednesday after the announcement of a $12.2 billion acquisition of U.S. Webster Financial and the flagging of short-term execution risks by analysts who otherwise welcomed the deal.
The Spanish bank’s Chairman Ana Botin, who has stuck to the company’s U.S. presence despite years of lower profitability there at group level, told analysts that to become a global player you have to be present in the United States.
Barclays said that the Webster acquisition would help to accelerate Santander’s U.S. return-on-tangible-equity ratio (ROTE), a measure of profitability, to about 18% by 2028 from 10.8% currently.
The broker also said that investor concerns centred on the perceived shift from previous messaging that favoured organic growth and buybacks over U.S. dealmaking, something Botin tried to dispel by saying there will be no more bolt-on acquisitions over the next three years.
Santander shares were down 3.7% by 0958 GMT, having risen 125% last year.
Santander said it expects the deal to deliver cost savings of about $800 million by the end of 2028.
Morgan Stanley said that those savings represented 55% of the target company or 19% of the combined, and would come on top of $200 million standalone cost cuts Santander U.S. is planning which would risk revenue attrition.
“This would limit upside potential from funding synergies, in our view,” the U.S. broker said.
Jefferies however said that the guided synergies were in line with previous deals.
Santander offered $48.75 per Webster share in cash and 2.0548 Santander shares per Webster share, representing a total value of $75 per share, a premium of 14% to its volume-weighted average share price of $65.75 for the three-day period ended on Monday.
On Tuesday, shares in Webster rose 9% to $71.95.
As the structure to fund the deal was split 65% in cash and 35% in new shares, implying a capital increase around 3.5 billion euros, Jefferies estimated that the capital impact at 140 basis points “would be manageable.”
On Wednesday, Santander launched a 5 billion euro share buyback as part of its shareholder remuneration policy.
(Reporting by Jesús AguadoAdditional reporting by Emma PinedoEditing by David Goodman, Elaine Hardcastle)
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