Bankinter to propose taking Línea Directa public and distributing share premium to shareholders as shares of the company
The share premium amounts to 1.184 billion euros. This would equal a current reasonable estimated market value of 82.6% of Línea Directa’s share capital, which will be distributed to the bank’s shareholders.
Once the deal is final, Bankinter shareholders will also become shareholders of Línea Directa, which will become an independent, publicly-traded insurer.
The goal is to split the direct insurance business from the banking business for each company to implement their own strategies independently in the future.
Today, the board of directors of Bankinter voted to propose, at the next annual general meeting, the distribution in kind of the full share premium (totalling 1.184 billion euros) by delivering to shareholders 82.6% of the share capital of its subsidiary, Línea Directa Aseguradora. Accordingly, the bank would maintain a minority shareholding of 17.4% of the insurer on its books.
The current reasonable estimated market value of 82.6% of Línea Directa Aseguradora to be delivered to Bankinter shareholders amounts to 1.184 billion euros, which accounts for 100% of the share premium to be distributed. For this purpose, based on advice received from experts, Línea Directa Aseguradora’s entire share capital has been valued at 1.434 billion euros.
The number of shares representing Línea Directa’s share capital is expected to be adjusted so that each Bankinter shareholder will receive one LDA share for each Bankinter share.
Once approved at the annual general meeting (scheduled for March 2020), the transaction will be submitted for required regulatory authorisation, after which delivered shares will be distributed and admitted to trading (foreseeably in the second half of 2020).
Before the transaction, Línea Directa will pay Bankinter a 60-million-euro dividend, bringing its capital adequacy ratio to around 180%, higher than its peers’ in Europe.
This transaction aims to separate the direct insurance business from the purely banking business, so that each company can follow their own future strategies independently and operate in their respective regulatory environments with a capital structure and dividend policy that fit their needs.
Bankinter’s banking operations are currently robust and solvent. They have grown significantly in terms of size, profitability and diversification (with a presence in four European countries and various business types), with a very balanced contribution from its several business lines.
Due to such robustness, the bank can consider carrying out this extraordinary distribution to its shareholders, which will have a limited impact on the Group’s profitability and even increase its consolidated CET1 capital ratio by 5 basis points.
Línea Directa Aseguradora, a great investment for Bankinter.
Since its founding in 1995, Línea Directa has gone from being a project created from the ground up to becoming a leading direct insurer in Spain, with results based on solid growth on the back of a disciplined risk and cost base management approach and a clear focus on technology. Currently, the company has over 3 million customers, making it the fifth leading insurer in issued motor premiums, with a market share of almost 7% in motor coverage.
In 2009, Bankinter acquired the 50% of Línea Directa Aseguradora it did not control from Royal Bank of Scotland for 426 million euros. Since then, the insurer has paid out 1.058 billion euros in dividends. If this board proposal passes, Bankinter shareholders will have direct ownership of 82.6% of this company, with a current estimated market value of 1.184 billion euros.