Merlin sells its 662 branches to BBVA for 1,987 million

BBVA has repurchased a portfolio of 659 branches and three unique buildings from Merlin Properties for 1,987 million euros, as announced by the socimi to the CNMV.

The property owner led by Ismael Clemente announced in February that he was going to reactivate the sale of the branches rented from the entity. These assets, included in the portfolio named Tree, they had a book value of just over 1,750 million euros.

At the time, the company anticipated that it had a clear schedule for the sale of these assets, with four divestment opportunities, the first of which was last February. Likewise, Clemente pointed out that there was a great appetite in the market by institutional investors, although BBVA had the right of first refusal over these assets.

In fact, it has previously used this purchase option with another smaller portfolio of branches. Specifically, it acquired a batch of 166 bank branches for an amount of 252 million euros.

BBVA was the one that initially sold its branches between 2009 and 2010 under a contract of sale and lease back to Tree Inversiones Inmobiliarias, currently owned by Merlin. At that time the portfolio consisted of more than 1,000 branches. Currently, the entity chaired by Carlos Torres, had a rental contract for them until 2040.

Merlin will take advantage of the money from the sale of these assets to reduce debt. Thus, of the 1,250 million that enter the socimi’s cash, 250 million will go to dividend and the remainder to reduce your leverage.

The purpose of the entity

With this operation, “it provides greater flexibility in the management of the branch network in Spain -as it becomes its owner again- and generates significant economic savings between now and the date on which the agreement ends, in 2040, in a context of growing inflation” explains the entity, specifying that the current contract “includes a clause according to which rental income is adjusted annually at 1.5 times inflation”.

Thus, BBVA specifies that it has agreed to pay 1,987 million euros for 100% of the shares of Tree Inversiones Inmobiliarias, owner of the properties (659 branches and three unique buildings), in an operation that is estimated to have an initial consumption of – 7 basis points of capital, and generate an initial net impact on the income statement of approximately -200 million euros, once the transaction is closed, foreseeably at the end of the second quarter. “These impacts will be more than offset by the expected cumulative savings following the execution of this transaction.”