First BanCorp., parent of FirstBank Puerto Rico, announced the signing of a stock purchase agreement for FirstBank to acquire Spanish bank Banco Santander Puerto Rico in an all-cash transaction worth $1.1 billion.
The transaction is subject to receipt of all necessary regulatory approvals and is expected to close in mid-2020.
When broken down, the 100% cash transaction goes as follows: $425 million base purchase price, or 117.5% of Banco Santander’s core tangible common equity, comprised of a $63 million premium on $362 million of core tangible common equity as of June 30, 2019; plus $638 million of Banco Santander’s excess capital as of June 30, 2019 paid at par; purchase price is subject to adjustment based on Banco Santander’s balance sheet as of the closing date.
FirstBank will not assume any of Banco Santander’s non-performing assets under the agreement.
This is the second banking consolidation announced this year, as Oriental revealed its intention this summer to pick up the assets of Scotiabank in Puerto Rico and the U.S. Virgin Islands.
If both transactions are finalized, there will be three commercial banks left on the island: FirstBank, Oriental and Popular. Credit unions will also continue serving their portion of the market.
“We’re very excited to announce this transformational transaction for our company. After completing comprehensive due diligence, we have signed an agreement to acquire Banco Santander Puerto Rico,” said First BanCorp. President Aurelio Alemán.
“This acquisition will significantly improve our scale and competitiveness in Puerto Rico, while enhancing our funding and risk profile. The transaction is financially compelling and generates 35% accretion to fully phased-in 2020 consensus earnings per share (EPS) with a tangible book value per share earnback period of 2.6 years,” he said.
As of June 30, 2019, Banco Santander had $6.2 billion of assets, $3.1 billion of loans and $5 billion of deposits. On a pro forma basis based on June 30, 2019 data, including purchase accounting adjustments, after the transaction FirstBank will have approximately $17.6 billion in assets, a $12 billion loan portfolio, and $14.2 billion of deposits.
“While continuing to grow and invest in our franchise, we have been preparing for a strategic transaction of this magnitude. The Banco Santander Puerto Rico team expands our talent bench in retail, commercial and business banking,” he said, without explaining how many Santander branches or employees it will keep after the deal closes.
“First BanCorp will become a stronger competitor in Puerto Rico with the scale and breadth to better serve retail and commercial customers and increase our financial investments in innovation and talent development,” Alemán said.
“We’re greatly appreciative of expanding our client base and we will work hard to continue enhancing our portfolio of products, services and channels to meet their needs and exceed their expectations,” he added. “Our combined institution will be well-positioned to continue growth initiatives and further support the economic recovery and redevelopment in Puerto Rico.”
Goldman Sachs & Co. LLC served as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to the company. Moelis & Company LLC and Simpson Thacher & Bartlett LLP advised First Bancorp.’s board of directors.