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Why Shares of Banco Santander Mexico Are Surging Today

By Bram Berkowitz - Updated Mar 26, 2021 at 11:22AM

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The bank's controlling shareholder plans to purchase all remaining shares that it doesn't already own.

What happened

Shares of Banco Santander Mexico (BSMX -2.95%) rose as much as 21% this morning after the bank's controlling shareholder, the Spanish lender Banco Santander (SAN 3.53%), announced that it intends to purchase all remaining shares of its Mexico subsidiary that it doesn't already own.

So what

Banco Santander Mexico has total assets equivalent to $90.3 billion and more than 18.7 million clients. The company is based in Mexico City and runs 1,350 branches with a total of 21,422 employees.

Banco Santander intends to purchase the remaining 8.3 million shares it doesn't already own. After the deal, Santander Mexico would delist from the Mexican Stock Exchange.

The outline of two people shaking hands.

Image source: Getty Images.

The cash offer from Banco Santander would represent a price equivalent to $5.80 per Santander Mexico U.S. share, which represents a 24.3% premium over the bank's closing price on Thursday.

In the filing, Santander Mexico said its board of directors "has favorably considered the presentation of the offer."

Now what

Banco Santander expects the deal to result in a return on invested capital of 14% and to improve earnings per share by 0.8% in 2023.

"The transaction is consistent with Banco Santander's strategy of increasing its weight in growth markets and reflects Banco Santander's confidence in Mexico and its Mexican subsidiary as well as their long-term growth potential," the company wrote in its filing.

Santander Mexico has reported strong returns on average equity in recent years, so it should help Banco Santander, which saw its shares rise 2.5% as of 10:45 a.m. EDT today.

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Stocks Mentioned

Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México Stock Quote
Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México
$5.26 (-2.95%) $0.16
Banco Santander, S.A. Stock Quote
Banco Santander, S.A.
$2.93 (3.53%) $0.10

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