Santander launches €7.1bn rights issue to support Banco Popular acquisition

Banco Santander has launched a €7.1bn rights issue at €4.85 per share to support its acquisition of struggling rival Banco Popular.

The price represents a 17.8% discount to the theoretical ex-rights price based on the closing price on 3 July. Santander will issue 1.46bn new shares of the same class and series as those already outstanding, providing existing shareholders preferential subscription rights.

It is expected that the pre-emptive subscription period will begin on 6 July and will last until 20 July. New shares are expected to begin trading on 31 July with full dividend rights from their issuance date, expected to be 27 July.

Group executive chairman Ana Botin said: "The acquisition of Popular is a unique opportunity to accelerate our strategy in Spain and Portugal. We expect it will deliver excellent returns for the bank and its shareholders, while providing important stability for Popular’s customers and the Spanish economy. We expect the acquisition will enhance all our key financial performance measures for the group from 2019 and beyond, generating a return on investment of 13-14% by 2020."

The net impact of the Banco Popular acquisition and the rights issue on Santander’s common equity tier 1 capital ratio will be neutral.

The bank also said on Tuesday that it expects to report an attributable profit for the first half of 2017 of around €3.6bn, up 24% on the same period last year. Excluding exceptional items recorded in the first half of 2016 and the impact of currency movements, profit is expected to rise 11%.