Take 5 and come back tomorrow (14/11/24) Markets Taxes Real Estate GRF BBVA SAB

None of what follows is investment advice.

Market environment: External worries – (Asia-Pacific markets declined with European markets up and US futures pointing down) – Asia-Pacific markets declined amid worries regarding potential US tariff increases and the strong dollar. European markets were higher and US futures down.

Response to the crisis: Something will be taxed in the end – (The Government’s allies’ rebel against the fiscal mess (Expansion p28) – The Government’s proposed changes are not necessarily what will be approved, judging from its past record and its weak support in Parliament. The bad news is that this is not necessarily going to result in a softer tax approach, as the proposed changes are partly the result of the Government allies blocking the extension of the tax on energy companies. It is also worth noting that the Basque allies have less incentive to block tax increases as they can largely offset them locally, should they desire, due to their special tax status.

Real Estate: If the shoe fits, wear it – (Merlin and Colonial open the door to moving their domicile out of Spain due to the new regulation of Socimi companies (Expansion p6) – Doing away with the tax benefits applicable to the Socimi companies would have a significant impact on earnings (currently exempt from corporate tax as long as 80% of earnings are paid out in dividends). On this basis it would make sense for the Socimis to consider relocating their domicile abroad in search of a softer tax regime and regulatory stability. This would face government criticism/opposition, as was the case when Ferrovial did it, but given that the Socimi’s are being demonised as the cause of rental inflation in housing, which I believe they are not, they might as well earn the criticism.

Grifols: Show me the money – (Brookfield reaches an agreement with Santander and Deutsche Bank to raise €11bn for the bid for Grifols (El Confidencial) – According to the report Brookfield has raised the funds needed to refinance Grifols’ debt on occasion of a change of control as a result of its joint bid with the founding family. This is likely to be seen in a positive light, as it was one of the preconditions for the bid to be launched, and it shows some confidence on the eventual success of the bid. However, it would be more useful to have information regarding the funding of the bid itself.

BBVA/Sabadell: Not at all costs – (BBVA managing director says that BBVA will not doubt for a second to withdraw the bid if the demands are not viable (Expansion p15) – The BBVA managing director had already said the same several weeks ago. However, it might make sense to reiterate the view with somewhat more emphasis given that the Competition Authority (CNMC) has decided to extend its analysis of the deal to phase 2, which presumably implies that it sees problems with the deal.

Market environment: External worries – (Asia-Pacific markets declined with European markets up and US futures pointing down) – Asia-Pacific markets declined amid worries regarding potential US tariff increases and the strong dollar. European markets were higher and US futures down.

Response to the crisis: Something will be taxed in the end – (The Government’s allies’ rebel against the fiscal mess (Expansion p28) – The Government’s proposed changes are not necessarily what will be approved, judging from its past record and its weak support in Parliament. The bad news is that this is not necessarily going to result in a softer tax approach, as the proposed changes are partly the result of the Government allies blocking the extension of the tax on energy companies. It is also worth noting that the Basque allies have less incentive to block tax increases as they can largely offset them locally, should they desire, due to their special tax status.

Real Estate: If the shoe fits, wear it – (Merlin and Colonial open the door to moving their domicile out of Spain due to the new regulation of Socimi companies (Expansion p6) – Doing away with the tax benefits applicable to the Socimi companies would have a significant impact on earnings (currently exempt from corporate tax as long as 80% of earnings are paid out in dividends). On this basis it would make sense for the Socimis to consider relocating their domicile abroad in search of a softer tax regime and regulatory stability. This would face government criticism/opposition, as was the case when Ferrovial did it, but given that the Socimi’s are being demonised as the cause of rental inflation in housing, which I believe they are not, they might as well earn the criticism.

Grifols: Show me the money – (Brookfield reaches an agreement with Santander and Deutsche Bank to raise €11bn for the bid for Grifols (El Confidencial) – According to the report Brookfield has raised the funds needed to refinance Grifols’ debt on occasion of a change of control as a result of its joint bid with the founding family. This is likely to be seen in a positive light, as it was one of the preconditions for the bid to be launched, and it shows some confidence on the eventual success of the bid. However, it would be more useful to have information regarding the funding of the bid itself.

BBVA/Sabadell: Not at all costs – (BBVA managing director says that BBVA will not doubt for a second to withdraw the bid if the demands are not viable (Expansion p15) – The BBVA managing director had already said the same several weeks ago. However, it might make sense to reiterate the view with somewhat more emphasis given that the Competition Authority (CNMC) has decided to extend its analysis of the deal to phase 2, which presumably implies that it sees problems with the deal.