Banco Santander SA agreed to take over Banco Popular Espanol SA after European regulators determined that the troubled lender was likely to fail and ordered it to be sold.
Santander will raise about 7 billion euros through a rights offer to bolster Popular’s balance sheet, it said in a regulatory filing on Wednesday. The lender will acquire Popular for 1 euro after its stock and shares resulting from the conversion of its riskiest debt and Tier 2 instruments were wiped out, imposing losses of about 3.3 billion euros on the bank’s securities holders.
Popular’s 37 billion euros of non-performing assets, the legacy of real estate-linked lending before Spain’s property crash, drained profit and capital, forcing new Chairman Emilio Saracho to say in April that the bank would need to sell new shares or find a buyer. The situation had deteriorated in recent days, with its market value falling by about half in a week to 1.3 billion euros.