SAN Banco Santander SA

--Santander intends to make cash offer to buy outstanding shares in the Mexican subsidiary that it doesn't already own

--Offer is for total consideration of around EUR550 million

--Santander plans to delist Santander Mexico from Mexican Stock Exchange

By Mauro Orru

Banco Santander SA plans to make a cash offer to buy out its Mexican subsidiary Banco Santander (Mexico) SA Institucion de Banca Multiple Grupo Financiero Santander Mexico for a total consideration of around 550 million euros ($647 million).

The Spanish bank said Friday that the offer would target about 8.3% of its Mexican subsidiary's share capital, with the transaction expected to be completed in the second or third quarter.

Santander already owns 91.7% of Santander Mexico, which it plans to delist from the Mexican Stock Exchange in a move that would require support from at least 95% of Santander Mexico shareholders in an extraordinary shareholders' meeting.

The bank expects to pay 24 Mexican pesos ($1.16) for every share of Santander Mexico, a 24.3% premium to the March 25 closing market price.

The deal is set to bolster Santander's growth profile and its capacity to generate capital, improving earnings per share by 0.8% in 2023.

The transaction is also expected to have a return on invested capital of about 14%, reduce the group's capital cushion it has to absorb future losses--known as the CET1 ratio--by about eight basis points, and be neutral in terms of tangible net asset value per share.

"It is also consistent with the bank's strategy to deploy capital in high growth markets. Mexico is a core market for the group with attractive long-term fundamentals," the bank said in a statement.

Santander also confirmed business has remained strong in the first quarter, with revenue in line with that of the fourth quarter of 2020 and cost of risk continuing on a downward trajectory.

The bank said it expects an underlying return on tangible equity of about 10% by the end of 2021 as its board plans to restore a shareholder remuneration policy between 40% and 50% of group underlying profit.

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

(END) Dow Jones Newswires

March 26, 2021 04:00 ET (08:00 GMT)

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