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Thursday, 21 August 2014
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Barcelona, Thursday 27 January 2011 REORGANISATION OF "LA CAIXA" GROUP “la Caixa” Group creates CaixaBank, leading financial institution in Spain, with a 10.9% core capital ratio and liquidity of €20 billion
“la Caixa” will transfer its banking business to Criteria CaixaCorp (which will become a banking group, changing its name to CaixaBank), and Criteria will transfer some of its industrial holdings (Gas Natural Fenosa, Abertis, Aguas de Barcelona, Port Aventura and Mediterranea Beach & Golf) to a new entity fully owned by “la Caixa”.

The financial holdings, the insurance business and the remaining industrial holdings (Telefonica and Repsol) will stay within CaixaBank, a company with a 20,600 million euro book value.

“la Caixa” will be the majority shareholder of CaixaBank, with approximately 81.1% of shares.

CaixaBank will strengthen its capital position, increasing its core capital ratio up to 10.9% (Basel II), after the issuance of a 1,500 million euro mandatory convertible bond. This core capital level is the highest amongst major banking groups in Spain, and fully complies with the levels required by the new plan announced by the Spanish Government. In addition, CaixaBank expects end of year 2012 Basel III core capital ratio to be above 8%, regardless of the applicable transition period (2013-2019).

This reorganisation, expected to be completed before August, will allow “la Caixa” Group to retain all of its current businesses (banking and industrial), while maintaining its firm commitment to its welfare projects.

“la Caixa”, Criteria CaixaCorp and MicroBank have today announced a framework agreement for the reorganisation of “la Caixa” Group. The transaction is structured as an asset swap in which “la Caixa” will transfer its banking business to Criteria, in exchange for some of Criteria’s industrial holdings and newly issued shares for a total of 2,000 million euros. As a result of this transaction, Criteria -which will become a banking group under the name CaixaBank– will reach a 10.9% core capital pro forma ratio, the highest level among the major banking groups in Spain. The new group structure will allow “la Caixa” to maintain its leadership position in the financial system and to benefit from the growth opportunities to appear over the forthcoming years.

“la Caixa”, which will continue being a savings bank (caja de ahorros), will be the majority shareholder in Criteria (new CaixaBank), with 81.1% of its share capital. This will allow it to indirectly continue its banking activities. Furthermore, “la Caixa” will assemble other businesses and investments under the new entity, over which it will have 100% control. The transaction was authorised today by the governing bodies of both “la Caixa” and Criteria. Both believe this is a very positive move and a great opportunity.

According to Isidro Fainé, chairman of “la Caixa” and Criteria, “the reorganisation we are announcing today is a historic milestone for our institution. This transaction marks the conclusion of a detailed analysis of the group structure started several years ago. In fact, Criteria’s IPO, launched in October 2007, constituted the first step of the reorganisation we are announcing today”. “I am convinced that we have selected the option that best fits both the new challenges we face in the financial international sector and our corporate history, values and vision, while fully preserving our character as a savings bank”.

According to Isidro Fainé, “this is the best means of strengthening both our institution and our values. This restructuring of “la Caixa” Group will emphasize our commitment to people, businesses, the regions in which we operate and the community. It is, ultimately, a change that will uphold the essence of the institution. And this essence is the very reason that “la Caixa” stands out; for its commitment to social projects, its excellence in service and the quality of care it shows to customers and employees alike.”

Juan María Nin, CEO of “la Caixa”, commented that “the reorganisation represents a great opportunity for “la Caixa” Group to maintain its legal structure, all of its businesses, its welfare projects and its employee agreements, in a complex economic and regulatory environment. At the same time, the new Group structure will provide “la Caixa” with access to alternative sources of capital. This will allow the Group both to benefit from the organic and inorganic growth opportunities that will emerge over the next few years and to anticipate the potential changes of our direct competitors”.

Gonzalo Gortázar, CEO of Criteria, emphasises that “our shareholders will become shareholders of a leading banking group, a banking group with a sound capital position and great prospects for the future. This transaction will allow us to continue delivering on our commitment made during the IPO to strongly increase Criteria’s exposure to the financial sector. Further, the market should see the new organisation’s structure (becoming a integrated banking group) as a positive, reinforcing Criteria’s share price, which has outperformed the IBEX-35 by 17% since the IPO”.

CaixaBank: Leading banking group in Spain and 18th in Europe

CaixaBank will start off with 5,409 offices, and will have the lowest NPL ratio (3.71%), the most comprehensive NPL coverage (70%), and the highest core capital ratio (10.9%, according to Basel II, after the issuance of a 1,500 million euro mandatory convertible bond) amongst the major banking groups in Spain. This core capital level fully complies with the requirement of the new “Plan de Reforzamiento del Sector Financiero”. In addition, CaixaBank expects its 2012 fully phased-in Basel III (look through) core capital ratio to be above 8%.

Its pro forma net income during the first 9 months of 2010 would have been 1,192 million euros. The new CaixaBank will be ranked 10th amongst euro zone banks, and 18th amongst banks in Europe by market capitalisation.

The new structure will allow the complete roll-out of “la Caixa”’s new Strategic Plan 2011-2014, presented today to “la Caixa”’s government bodies. The main objectives of said plan are to strengthen its leadership position in retail banking, to improve business diversification, to grow on an international scale, to maintain financial strength and to improve financial returns.

In addition to the Spanish banking business, CaixaBank will also have other complimentary activities. These include the insurance business (VidaCaixa, VidaCaixa Adeslas and CaixaVida), the holdings in international banks and the holdings in Telefonica and Repsol. As a result of the new structure, financial assets will represent around 75% of the total value of CaixaBank.

The banking business received by CaixaBank does not include Servihabitat nor other real estate businesses that will remain within the new entity. In this way, CaixaBank will start off without any foreclosure real estate exposure, which means that, together with its core capital ratio (10.9%), its NPL ratio (3.71%), its high NPL coverage ratio (70%), the liquidity (19,638 million euros) and the existing generic provisions (1,835 million euros), CaixaBank will become one of the strongest entities in the sector.

“la Caixa” Group: Banking business, the new entity and Welfare Projects

“la Caixa” Group will maintain its legal structure as a savings bank (caja de ahorros), and it will continue to hold all of the businesses that it currently owns.

Through the new entity, which will hold stakes in the aforementioned industrial companies, the group will continue to play a key role as a long term investor in some of the main corporate entities in Spain.

Lastly, the Group plans to maintain the level of resources it directs at welfare projects. This ensures both long term growth and sustainability and demonstrates social responsibility even in an unfavourable economic environment.

Transaction structure and valuation

The transaction will start with the spin-off of the banking business of “la Caixa”, which will be transferred to MicroBank (100% financial subsidiary of “la Caixa”). Subsequently, “la Caixa” will exchange with Criteria the shares in MicroBank (valued at 9,500 million euros), for some of the industrial holdings and newly issued shares of Criteria (valued at 2,000 million euros). Finally, Criteria will merge with MicroBank, forming the final structure of CaixaBank, whose shares will continue to be listed in the Spanish Stock Exchange.

The new CaixaBank will agree on the issuance of a 1,500 million euro mandatory convertible bond. The bond, which will pay a market coupon before being converted into new shares of the Bank, will be distributed and underwritten by “la Caixa”, and will reinforce the capital structure of CaixaBank. ç

Furthermore, a free share distribution program will be put in place for all employees of “la Caixa” Group, who will receive approximately 0.4% of CaixaBank’s share capital in quantities and terms yet to be agreed.

Once all of these transactions have occurred, “la Caixa”’s stake in CaixaBank will be 81.1%. This gives “la Caixa” the flexibility to, if necessary, allow new shareholders to invest in CaixaBank while maintaining control over the bank.

The assets subject to the aforementioned transactions will be valued as follows. “la Caixa” will transfer its banking business at 0.8x book value (11,850 million euros). Criteria will transfer the relevant assets for a total amount of 7,471 million euros (being listed assets valued at the average market value of the last 30 days, and non-listed assets according to market practices). The difference will be settled in new shares issued by Criteria at pro-forma NAV (5.46 euros per share as of 26th January 2011, which implies a 27% premium above Criteria’s closing price as of 26th January 2011).
 
CaixaBank expects to distribute a minimum dividend of 0.231 euros against 2010 profits, and to maintain a similar dividend policy in the future. Furthermore, Criteria’s shareholders will be offered the right to receive in shares the final 0.051 euro dividend against 2010 profits yet to be approved by the Criteria’s General Shareholders’ Meeting. Criteria is analysing the possibility to offer this right in two out of the four dividend payments against 2011 profits.

The reorganisation process is expected to be completed before August 2011

The signature of the framework agreement that describes the principles of the Group’s reorganisation has been authorised by the respective governing bodies and/or the Boards of Directors of “la Caixa”, Criteria and MicroBank. On the 24th February, once the customary due diligence processes for this type of transaction have been completed, the Board of Directors of “la Caixa” and of Criteria will meet to agree on the final terms of the transaction. Following that, a General Assembly of “la Caixa” and a General Shareholders’ Meeting of Criteria will be called, thus concluding the approval.

The process is expected to be completed before the end of August 2011, once the conditions and legal formalities in this type of transaction have been met, and the required regulatory approvals obtained.

About “la Caixa”

“la Caixa” Group, as of 31th December 2010, has assets worth 285,724 million euros, 10.5 million customers, a staff of 28,651 employees and the largest sales network in Spain’s financial sector (5,409 branches and over 8,181 automatic cash points).

“la Caixa”, chaired by Isidro Fainé and run by Juan María Nin, recorded a net profit of 1,228 million euros at September 30, 2011. The entity controls Criteria CaixaCorp, which owns the largest portfolio of investee companies in Spain and went public in 10th October 2007. The company has holdings in the financial and banking sectors: Mexican GFInbursa (20%), Portuguese BPI (30.1%), Chinese The Bank of East Asia (10.1%), Austrian Erste Bank (10,10%) and French Boursorama (20.8%).

With a budget of 500 million euros in 2010, "la Caixa" remains the Spanish private entity that devotes most resources to development of social initiatives.

 About Criteria CaixaCorp

Criteria CaixaCorp (www.criteria.com) is an investment group holding significant stakes in financial and industrial companies. It is chaired by Isidre Fainé while Juan Maria Nin serves as vice-chairman. Gonzalo Gortázar is the company’s CEO. The company’s core shareholder is “la Caixa”; it has been listed on the Spanish stock exchange since October 2007. Criteria has a firm commitment to international growth and active management of its portfolio, boosting the growth, development and returns of the companies in which it invests.

Criteria holds the largest corporate investment portfolio in Spain in terms of the total volume of its gross assets (GAV), which amounted to 24,311 million euros at January 26, 2011. Consolidated net profit was 1,529 million euros, with growth of 35% at September 30, 2010. Consolidated recurring net profit was 1,110 million euros, 19% more. www.criteria.com

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