Spanish banks to the rescue?

According to the Herald Tribune, Grupo Santander will be acquiring the remaining stake in Sovereign Bancorp that is does not currently own.

Santander said it would pay $3.81 a share for the 75.65 percent stake in the U.S. bank it does not already hold. This is a total figure of 1.9 billion dollars.

Previously in 2006, Santander paid 3.3 billion dollars for 24.9 percent of Sovereign Bancorp, becoming its largest shareholder. During this purchase it was agreed that Santander could not bid for the remaining stake in Sovereign at market value until June 2009. But during the recent crisis, like many American banks, Sovereign has been severely affected by the toxic debts emerging from the country’s subprime crisis. Which lead a committee from Sovereign’s capital and finance committee to request that that Santander consider the purchase.

For Santander, currently unaffected by the financial crisis it will significantly improve its geographic footprint and result in a net profit for Sovereign of $750 million in 2011. Although this transaction still needs regulatory approvals in the United States and Spain and approval by both companies’ shareholders.

According to Ralph Whitworth, chairman of the capital and finance committee of Sovereign’s board, said in a statement “Given the unprecedented uncertainty in the current market environment and the challenges facing Sovereign, we believe this is the right transaction at the right time for Sovereign”.

Andrew Bellés

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