When Ana Botín took over as executive chair of Banco Santander after the death of her father, Emilio, in September 2014, she quickly made her mark. The following January, Santander, the euro zones biggest bank, gathered 7.5 billion ($8.9 billion) in an accelerated book build that broke with the previous regime, which had resisted calls from investors to raise capital.
The Spanish firm launched the rapid share sale to address a perception that it had the weakest capitalization of any major European bank, having refused to disclose its common equity tier-1 ratio under Basel III rules. With volatility returning to markets in 2015, Santander reaped the reward for seeking funding while investors still had a healthy appetite for risk.
The deal caught the attention of Europes equity capital markets bankers for its sheer size. It was the regions biggest-ever such stock sale and the largest worldwide since Merrill Lynch & Co. raised $10 billion from Asian investors in 2008 during the run-up to the Lehman Brothers Holdings crisis.
Timing was important, says Javier Martinez-Piqueras, London-based co-head of equity capital markets for Europe, the Middle East and Africa at UBS, which was lead book runner with Goldman Sachs Group. We executed the deal in the first full week back after the Christmas holidays, when investors were in risk-on mode, with cash to put to work.
Botín, 55, chose UBS and Goldman because they knew Santander and its investor base well, essential given that the two banks were asked to take on 7.5 billion worth of risk overnight before distributing it among institutions between market closing on January 8 and opening the next day.
Both firms had worked on merger and acquisition and ECM transactions for Santander; UBS investment bank president Andrea Orcel, who played a big role in winning the deal thanks to his long-standing relationship with the Boadilla del Montebased lender, was a former golfing partner of Emilio Botín. Santander vice chairman Guillermo de la Dehesa has long served as an adviser to Goldman Sachs International.
The banks management team brought Goldman and UBS on board in November 2014. Once the group decided to assemble such a large sum without a formal capital raising, work began in earnest over Christmas. The size of the deal was its most daunting aspect, and the book runners had to be sure they could cover the order book, so much of the preparatory work was focused on finding investors with sufficiently deep pockets. But Santander also had scale on its side. The firms fundraising target was below 10 percent of its 73.8 billion market capitalization, so it could proceed without preparing documentation. They were able to do this deal given the extraordinary liquidity of the stock, says Martinez-Piqueras.
Total demand amounted to more than 11 billion at the placement price of 6.18 per share, with orders from 235 investors, according to Santander. The buyers were reportedly a mix of hedge funds and long-only investors.
The deal propelled Goldman and UBS to the top of Europes ECM book runner tables, and the two firms shared $89 million in fees. Despite the January sale, however, Santanders capital ratio of 9.85 percent is still lower than those of its European peers. Ana Botín plans to boost that number to 11 percent as part of a broader turnaround. Shes also shaken up Santanders management in the U.S. after it failed to meet local regulatory standards. Theres much work yet to do, but her father would have admired her no-nonsense approach.
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