Carry on in Spain

8 May 2003

Spain may be Europe s best banking market. But Barclays is paying a peak price for Banco Zaragozano over three times book. Although Barclays can easily afford this, the surplus capital splurged in Spain may jeopardise its share buyback programme.

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British bank Barclays agreed to buy Banco Zaragozano, Spain's eighth largest lender, for E1.1bn in cash to deepen its retail and commercial banking presence in Europe.

The UK bank said 54% of Zaragozano's shareholders had agreed to sell at the offer price of E12.7 a share, 13% more than the previous day's closing price. Speculation about an imminent bid had already lifted Zaragozano's share price by 35% this year. To go ahead, the bid requires 75% of shareholders to accept the offer.

Barclays said the deal would enhance earnings per share before oneoff restructuring charges. The bank added that total phased in pretax synergies are expected to be approximately E100m.

Barclays' preexisting Spanish operation is the country's 10th largest private banking group, based on total assets.

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