Spain's BBVA to Buy Compass Bancshares for $9.6 Billion

Spain's second biggest bank, Banco Bilbao Viscaya Argentaria SA, agreed this morning to buy Binghampton's Compass Banchshares Inc. for $9.6 billion. Shareholders will be offered $71.82/share in cash or 2.8 new BBVA shares -- an 8.2% premium on Compass's $66.37 close yesterday (shares closed up $4.59 (7.4%) on the rumors). BBVA is trying to build its position in Texas and California, targeted at Hispanic Americans. Compass operates more than 400 branches in Alabama, Arizona, Colorado, Florida, New Mexico and Texas -- giving BBVA a total of 622 U.S. branches. Compass had been shopping itself and its $31b in assets in recent weeks, in the hopes of getting $70+/share, sources said. Last June, BBVA bought Texas Regional Bancshares Inc. for about $2 billion; it has also purchased Laredo National Bancshares Inc. and State National Bancshares. BBVA has itself been the subject of takeover speculation; possible courters range from Citigroup Inc. to Bank of America. But in a recent note, Dresdner Kleinwort analysts suggested that Spain's #1 bank, Banco Santander Central Hispano, would not allow a large U.S. bank into Spain. BBVA shares fell $0.84 (4.2%) on the news in Madrid this morning.

Sources: Press Release, Wall Street Journal, Bloomberg
Commentary: Is Prudence Passé? Private Equity and LBO Cyclical Sector Targets • Credit Derivatives, Moral Hazard and Systemic Risk
Stocks/ETFs to watch: Banco Bilbao Viscaya Argentaria S.A. (BBV), Compass Bancshares Inc. (CBSS). Compass competitors: Regions Financial Corp. (RF), CapitalSouth Bancorp (CAPB), Susquehanna Bancshares Inc. (SUSQ). BBVA competitors: Banco Santander Central Hispano S.A. (STD). ETFs: streetTRACKS KBW Regional Banking ETF (KRE), HOLDRS Regional Bank (RKH), iShares Dow Jones U.S. Regional Banks (IAT), iShares MSCI Spain Index ETF (EWP), iShares S&P Global Financials Sector (IXG)

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