Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Banco Santander Mexico Are Surging Today

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

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
BSMX
$5.26 (-2.95%) $0.16
Banco Santander, S.A. Stock Quote
Banco Santander, S.A.
SAN
$2.93 (3.53%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
338%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.