* BBVA offers 12.20 Turkish lira per share to buy stake in
* Offer represents 15% premium compared to Friday's close
* Bank says deal would increase EPS by 13.7% in 2022
* Shares in BBVA fall 3.6%, Garanti rises 10%
* Plunge in lira leave companies exposed to foreign
MADRID, Nov 15 (Reuters) - Spain's BBVA offered on
Monday to buy the rest of Garanti for up to 2.25
billion euros ($2.6 billion), taking advantage of a slide in the
lira and raising fears in Turkey that foreigners might snap up
assets at bargain prices.
The cash offer to buy out the remaining 50.15% stake in
Garanti for 12.20 Turkish lira ($1.22) per share represented a
premium of 15% over Friday's market price.
The proposal means BBVA could potentially buy 51% of Garanti
for less than half the 7 billion euros it spent buying up the
49.85% stake it currently holds.
BBVA, like rival Santander, is struggling to earn
money from more mature markets in Europe and has been expanding
in emerging markets, where it sees greater growth opportunities.
Other major foreign banks have by contrast been pulling back
from Turkey. Last week UniCredit sold its remaining
stake in Yapi Kredi to Kok Holding for 300 million
JP Morgan said in note to clients it expected some share
price weakness on the "back of the economic and political risks
associated with a larger stake in Garanti."
But the U.S. broker said increasing the stake in Garanti was
more accretive in terms of earnings per share than doing a share
buyback for 1.4 billion euros, which it said was equivalent in
terms of capital impact.
Shares in BBVA fell 3.9%, while shares in Garanti rose
around 10% on the news.
BBVA Chairman Carlos Torres tried to dismiss some market
concerns, saying on Monday that the lira depreciation and a
potential further economic deterioration was "already priced in
because the returns are so positive".
BBVA is taking advantage of policy missteps in Turkey, where
the central bank has slashed interest rates by 300 basis points
since September despite inflation rising to nearly 20% and is
expected to cut again this week.
Turkey's lira has weakened sharply in recent months and hit
a record low of 10.05 to the dollar.
BBVA has been hedging on the foreign exchange markets to
protect its earnings and capital from headwinds in Turkey and
bank executives said on Monday it would continue to do so.
ASSETS IN TURKEY AT LOW PRICES
Torres said the deal's entry price in euros was "very
attractive", and in lira for the minority shareholders.
Some economists in Turkey expressed concern that recently
depreciated assets in the country could now be snapped up at
very cheap prices by foreign companies.
"We say that exports are going cheap, tourism is going
cheap, housing is going cheap by giving citizenship to
foreigners," Mustafa Sonmez, a Turkish economist and columnist,
said on Twitter.
"Now, more companies will go to the vultures, with the
bank's share at 10 Turkish Lira, getting cheaper in dollars.
Garanti is an example of this. It's called total impoverishment
(of the country)."
BBVA needs approval from Turkey's Capital Markets Board and
the BDDK bank watchdog, government regulators that could
technically block the offer.
To cope with the pandemic and ultra-low interest rates, BBVA
last year sold its U.S. business, generating more than 8 billion
euros to focus on cost cutting in Spain and strengthening
The Spanish lender's board also recently agreed to buy back
10% of its capital for up to 3.5 billion euros, leaving it with
a proforma capital ratio as of September of 13.18, and with an
excess capital of around 3.6 billion euros afterwards.
BBVA is expected to give more details regarding additional
capital deployments at an investor day later this week.
In the event that not all Garanti shareholders accept the
offer though BBVA exceeds a 50% stake, BBVA could increase its
holding without launching a takeover bid.
BBVA estimated a maximum negative impact of approximately 46
basis points in the core tier-1 fully loaded capital ratio, and
around 13.7% accretion to its 2022 earnings per share and an
about 2.3% accretion to its tangible book value per share,
assuming all Garanti shareholders accept the offer, BBVA said.
Bank of America advised BBVA on the deal, which would help
the Spanish lender generate up to 25% of its earnings from
Turkey from 14% at present.
The transaction is expected to be closed in the first
quarter of 2022.
($1 = 10.0153 liras)
(Additional reporting by Jonathan Spicer in Istanbul and Emma
Pinedo in Madrid; Editing by Inti Landauro, Edmund Blair, Emelia
Sithole-Matarise and Catherine Evans)