Briefing note
The Boards of Directors of “la Caixa” and Criteria approve the terms of the Group's reorganization
Criteria net profit up 38% in 2010 to €1.82 billion
Recurring net profit up 21%.
The Board of Directors resolves to submit a proposal for shareholder approval to pay a final dividend equivalent to €0.051 per share, which shareholders may choose to receive in cash or shares.
Total shareholder remuneration in 2010 of €0.311 per share.
Barcelona, February 25, 2011
The Boards of Directors of "la Caixa" and Criteria have approved terms of the "la Caixa" group's reorganization. "la Caixa" will transfer its banking business to Criteria (which will become a banking group, changing its name to CaixaBank), while Criteria will transfer some of its industrial holdings (Gas Natural Fenosa, Abertis, Aguas de Barcelona, PortAventura and Mediterránea Beach & Golf Community) to a new entity fully owned by “la Caixa.” The new entity will also oversee Servihabitat and other real estate businesses “la Caixa”, which will continue to be a savings bank, will be CaixaBank's majority shareholder, with 81.1% of its share capital. This will allow it to indirectly continue its banking activities (see Appendix I).
The final terms of the transaction have been reviewed by the Independent Committee (an ad hoc Board committee) composed of independent directors of Criteria. This committee has obtained fairness opinions from Citigroup and Société General, which confirm the fairness ‐ under a financial point of view‐ of the proposed transaction for Criteria's minority shareholders.
CaixaBank will start off with over 5,400 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 Basle II, after the issuance of €1.5bn of mandatory convertible bonds) amongst the major Spanish groups. This core capital level fully complies with the requirements of the new plan announced by the Spanish government (Plan de Reforzamiento del Sector Financiero). In addition, CaixaBank will also have other complementary activities. These include the insurance business (VidaCaixa Holding), the holdings in international banks (The Bank of East Asia, Erste, GF Inbursa, Boursorama and BPI) and the holdings in Telefónica and Repsol (see Appendix II).
1 This reorganization process is expected to be completed before the end of August 2011, once the required regulatory approvals are obtained. A General Assembly of “la Caixa” and a General Shareholders' Meeting of Criteria will be called soon to approve the process (see Appendix III).
With this, Criteria has made significant inroads in delivering on the commitment made during the October 2007 IPO to strongly increase Criteria's exposure to the financial sector through projects of maximum solvency. In the new structure, financial assets will represent around 75% of CaixaBank's total value.
2010: results underscore the company's excellent progress
Criteria CaixaCorp reported a 38% increase in net profit in 2010 to €1.82 billion.
Consolidated net recurring profit rose 21% to €1.42 billion, driven by the solid recurring earnings of the Criteria's high quality investees. Profits from affiliates rose 22% to €1.63 billion.
By business line, profits from the international banking portfolio soared 65% to €283 million. Meanwhile, profits from the insurance portfolio increased 25% to €267 million. Finally, the services portfolio continued to showcase its resilience, with an 8% increase in profit (to €1.06 billion).
Net non‐recurring profit in the year reached €399 million, thanks above all to the €588 million in tactical disposals from the services portfolio (0.86% of Repsol, 0.74% of Gas Natural, 0.44% of Abertis and 0.282% of Telefónica), generating attributable net profit of €162 million. Also contributing were the €162 million of gains on the sale of Agbar and the takeover of Adeslas, on June 7, which represented a net cash outflow of €527 million. The sale of the operational leasing business in December 2010 for €62 million (net gain of €50 million) and the attributable portion of non‐recurring profits of investees, mainly Gas Natural, also contributed. Finally, Criteria recognized €21 million of net provisions, mainly for its banking affiliates.
Criteria's financial portfolio accounted for 37% of the company's gross asset value (GAV) at the end of 2010. Since the IPO, the weight of financial assets has increased by more than 20 percentage points, enabling the company to meet its objective of rebalancing the asset mix to emphasize financials, while maintaining investments deemed strategic and of particular interest in services.
Criteria’s net asset value (NAV) at December 31, 2010 stood at €17.24 billion, with NAV per share of €5.13. GAV was €23.06 billion, 80% of which corresponded to Criteria's listed portfolio.
Net debt ended the year at €5.82 billion, equivalent to 25% of GAV; the company's commitment is to keep this ratio below 30%.
Criteria's long‐term debt ratings are A and A2 by Standard & Poor’s (S&P) and Moody's, respectively.
2 The corporate reorganization has prompted both S&P and Moody’s to put their ratings under review for a possible upgrade.
Criteria's share performed strongly in 2010, notching up a 20.8% gain and easily beating the main benchmark indices. The Ibex 35 slumped 17.4%, while the Eurstoxx50 closed the year down 5.8%. The total return including dividends would be 28%. Criteria is one of the few Ibex 35 to end 2010 in the black. Taking the closing price on February 24, 2011, of 5.068 per share, Criteria is up 27.27% year‐to‐date in 2011. Criteria’s outperformance of the Ibex showcases the stock’s defensive traits and long‐term value.
We would also highlight Criteria’s outperformance of the Ibex35 since its listing. From the date of its IPO on October 10, 2007 until yesterday’s close (February 24, 2011), Criteria’s share price has outperformed the Ibex by 24.9 percentage points.
Meanwhile, considering the total €0.691 per share gross dividends paid out as of today, shareholders participating in the October 2007 IPO will have achieved a positive return on their investment.
Major deals show the investment group's proactivity
Criteria carried out a number of transactions in 2010 that bolstered its position in different areas while actively managing the portfolio.
Criteria raised its stake in The Bank of East Asia (BEA) to 14.9% in the first quarter, before taking it to over 15% by the end of the year. In addition, on June 7, the company completed the deal with Agbar and French social insurer Malakoff Médéric that had been announced jointly with Suez Environnement on October 22, 2009. Under the deal, Criteria acquired 99.77% of the shares of Adeslas (Spain's leading health insurance company) for €1.19 billion, to merge it with SegurCaixa, the non‐life insurance company owned by SegurCaixa Holding. As a result of the Adeslas acquisition, Criteria sold Suez Environnement a 24.5% stake in Agbar, raising the French company’s holding to 75.01%. Criteria still owns 24.03% of Agbar.
Meanwhile, hedging arrangements (equity swaps) were made in the first half over 1.03% of Telefónica. The move strengthened the strategic nature of Criteria’s stake in Telefónica, which stood at 5.03% at December 31.
There were also tactical disposals in the year from the services portfolio totaling €588 million, as detailed above.
In December, within the framework of the agreement to integrate the vehicle leasing business in Arval (a BNP Paribas Group company), Criteria transferred CaixaRenting to “la Caixa” for €62 million, generating a net consolidated gain of €50 million.
In January of 2011, Criteria reached an agreement to sell 50% of VidaCaixa Adeslas Seguros Generales, the non‐life insurance company of "la Caixa," to Mutua Madrileña for €1.08 billion, expected to generate consolidated net gains for the Criteria Group of €450 million.
3 Shareholder remuneration policy: high, recurring dividends
Criteria CaixaCorp's shareholder remuneration policy will continue to entail quarterly dividend payments, in March, June, September and December.
At its meeting yesterday, the Board of Directors resolved to submit a proposal at the next Annual General Meeting (tentatively in May 2011) to appropriate retained earnings in 2010 to voluntary reserves. It also intends to propose an increase in share capital with a charge to unrestricted reserves from retained earnings of approximately €172 million (€0.051 per share), as part of the new shareholder remuneration scheme.
Under the new scheme, shareholders will have three choices: 1. to receive shares issued in the bonus share issue; 2. to receive cash from the sale of rights to the share on the market; and 3. to receive cash from the sale to Criteria CaixaCorp of the rights to the issue at a price to be determined by Criteria, which in effect means receiving an amount equivalent to the dividend.
They can also combine these options.
The first of the optional remuneration schemes, which replaces the traditional final dividend, is expected to take place in June 2011.
Criteria plans to extend this new formula in substitution of future dividends.
The total shareholder remuneration in 2010 of €0.311 per share breaks down as follows:
Dividend Type €/share Approval date Payment date Charge to reserves Ordinary 0.06 19‐05‐10 1‐03‐11(1) 3rd interim div. 2010 Extraordinary 0.08 2‐12‐10 11‐01‐11 2nd interim div. 2010 Ordinary 0.06 4‐11‐10 1‐12‐10 1st interim div. 2010 Ordinary 0.06 29‐07‐10 1‐09‐10
Bonus share increase €/share Approval date Payment date 0.051 AGM (2) June ‐ 2011(1) (1) Expected payment date (2) Pending approval at the AGM
Within the reorganization of the “la Caixa” group, the new CaixaBank will follow Criteria's shareholder remuneration policy, distributing a dividend of at least €0.231 per share in 2011.
Among other indices, Criteria is included in the Ibex 35, MSCI Europe (Morgan Stanley Capital International), MSCI PanEuro, DJ Stoxx 600, FTSE Eurofirst 300, Dow Jones Sustainability Index, Spain Titans 30 Index, BCN Top Euro and FTSE4Good.
Communications Department Criteria CaixaCorp Tel: + 34 93 411 75 23 / 75 17 ‐ 93 409 21 21 e‐mail: comunicació[email protected]; comunicació[email protected]
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Appendix I
Boards of “la Caixa” / Criteria approve final terms of the transaction
Final terms: Confirmatory due‐diligence completed satisfactorily Fairness opinions received Book value of “la Caixa”’s banking business: €11.9 bn (valued at 0.8x equates to €9.5 bn) Valuation of Criteria’s exchanged assets: €7.5 bn Capital increase: €2.0 bn (at €5.46 per share, NAV as of 26 January 2011) o 374 million shares issued to “la Caixa” o 27% higher than unaffected price (1) Mandatory convertible bond: €1.5 bn
Boards have approved final terms in line with original announcement
Resulting structure: “la Caixa” 81.1%, free‐float 18.9%, of which employees allocation ~0.4%
th 10 (1) Closing Price as of 26 January 2011
Appendix II
Timetable update
9 27‐28 January Transaction Announcement / Webcast Work on confirmatory due diligence and fairness opinions from independent advisors 9 24 February Receipt of due‐diligence report and fairness opinion Boards of “la Caixa” / Criteria approve final terms of the transaction
9 25 February Criteria (New CaixaBank) –Analyst Presentation March Institutional roadshow
28 April General Assembly of “la Caixa”
May Criteria’s Annual General Meeting
May Issuance of the Mandatory Convertible Bond
June Receipt of regulatory approvals 1
July Expected closing of the transaction
(1) Includes Bank of Spain, Min. of Economy, Govern de la Generalitat
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Appendix III
“la Caixa” Group New Structure
Total Book Value €30.9 Bn Welfare Projects ‐ “la Caixa” Debt (€8.6 Bn) ‐ Free Float of the Bank (€3.8 Bn) Net Book Value €18.4 Bn
81.1% 100% Criteria "la Caixa" Group minorities CaixaBank employees New institution (former Criteria ‐ listed) (not listed) 18.5% ~0.4% Book Value: €20.3 bn Book value: €10.6 bn
Core Banking Business1 International Telefónica Real estate Rest of service Domestic Retail banks portfolio + Repsol assets portfolio Banking & • Erste Bank • Gas Natural insurance • Inbursa • Abertis • BEA • Agbar • BPI • Port Aventura • Boursorama • Mediterránea
The respective Boards of Criteria and “la Caixa” have approved the final terms of the transaction, a confirmatory due diligence has been carried out and the external auditor has reviewed the 2010 pro‐forma information
14 (1) Core banking business of CaixaBank also includes financial businesses of InverCaixa, Finconsum, GestiCaixa and the 5.0% stake in BME
Appendix IV
Criteria’s investee portfolio at December 31, 2010:
Services Portfolio Financial Portfolio Gas Natural 36,64% Insurance International banking Abertis (1) 24,61% VidaCaixa Grupo 100% Boursorama 20,76% BME 5,01% VidaCaixa 100% GFInbursa 20,00% Grupo Agbar 24,03% VidaCaixa 99,91% Banco BPI 30,10% Adeslas Repsol‐YPF 12,69% AgenCaixa 100% BEA (5) 15,20% Telefónica 5,03% Erste Group Bank 10,10% Port Aventura 50% GDS‐ Correduría de 67% Entertainment SA Seguros Mediterránea 100% Specialized financial services Beach&Golf Community InverCaixa Gestión 100%
Finconsum 100% GestiCaixa 100%
(1) Shareholding is 28.48%
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Appendix V
Consolidated income statement summary
January ‐ December
€ million 2010 2009 % Chg Services 1.059 982 8% International banking 283 171 65% Insurance 267 213 25% Specialized financial services 23 (29) ‐ Profits from investees 1.632 1.337 22% Operating expenses (23) (20) 15% Interest expenses (130) (89) 46% Amortization of intangible assets acquired and similar items (66) (45) 47% Other attributable profit/(loss) 11 (7) ‐ Holding activity (208) (161) 29%
Net recurring profit 1.424 1.176 21% Net gains on the sale of investments and others 426 264 61% Non‐recurring profit (investees) (3) 57 ‐ Provisions (24) (180) (87%)
Net non‐recurring profit 399 141 ‐
Net profit of the Group 1.823 1.317 38% Note: The consolidated income statement has been prepared in accordance with IFRS, although figures are presented in accordance with the model used by the Group’s management.
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