Banco Sabadell faces a key week to decide whether it agrees to join BBVAEFE

Bank Sabadell starting this Monday he faces a key week in which your board of directors must issue its opinion on the takeover offer that was disseminated BBVA after a leak. The entity of Vallesan origin, which is considering standing up, has on the table to decide if it considers its future alone, if it accepts the offered share exchange or if it is willing to negotiate an improved offer.

Sabadell shares closed on Friday at 1.885 euros, which represents an increase of 8.5% since the news became known. By not reaching the level corresponding to the premium proposed by BBVA (30% compared to Monday's price), analysts interpret that the market does not quite see that the proposal takes shape or that there is no certainty on the possibility of integration moving forward.

The bank chaired by Carlos Torres Vilawhich is very interested in tempting Sabadell shareholders, values ​​the entity of Vallesan origin at around 12,224 million euros in its offer, compared to the 10,254.82 million at which it closed on Friday, with an exchange ratio of one new BBVA share for every 4.83 of Sabadell. There are analysts who value the proposal and others who downplay its importance because it is paid for with shares and, although it is true that Sabadell has quadrupled on the stock market since 2020, BBVA shares have also become more expensive in this period, around double.

BBVA, for its part, has lost 9.6% since the news was announced, to 9.85 euros and a capitalization of 57,503.7 million. Market sources affirm that the evolution of the title reflects that the offer should not go higherwhile there are other analysts who consider that since it is an exchange through shares, the proposal could be more attractive for Sabadell if part of it was in cash.

These are some keys to the proposal being studied by the Catalan bank and the context in which this operation is developed.

Largest operation since the merger between CaixaBank and Bankia

BBVA's interest in absorbing Banc Sabadell, admitted on Tuesday and detailed on Wednesday, with a formal offer to through a letter sent to the council of the entity of Catalan origin, represents the largest operation in the Spanish banking sector since 2020, when CaixaBank and Bankia announced their merger.

That operation led CaixaBank, whose main shareholders are the La Caixa foundation and the State, to become the banking leader in Spain. And if the one proposed by BBVA prospers, it would place the resulting entity on the European podium, only behind the French BNP Paribas and Santander.

Bank concentration risk

BBVA's offer has revived the debate on the banking concentrationin Spain and on the competence in the sector. If this integration is consummated, The Spanish market would be controlled by three major players: CaixaBank, Santander and BBVA with around 70% of the business.

In any case, from the European Central Bank (ECB) and even from the Government, integrations, although it would be preferred that they be cross-border, which are more difficult, do not usually put many obstacles. In the last of them, the National Market and Competition Commission (CNMC) authorized the operation and imposed some conditions to avoid financial exclusion in certain municipalities and guarantee measures to prevent monopoly or duopoly situations from occurring.

The Minister of Economy, Carlos Bodysaid a few days ago that it is important for the banking sector to continue maintaining a “competitive” position in case the operation goes ahead, and the Generalitat itself and Catalan business sectors have shown their misgivings about the risk of reducing banking competition. in Catalonia.

Have 16% of the resulting bank or continue alone

The Sabadell council must decide whether or not you think BBVA's offer is enoughwhich means that Sabadell shareholders they would have 16% of the resulting bank or if he rejects it but is open to negotiating a higher offer from BBVA and having more prominence in the resulting group.

As plans to attract to the project, BBVA proposes two operational headquarters for the new bank, one in BBVA City, in Madrid, and another in Sant Cugat del Vallès (Barcelona), where Sabadell currently has its main operating center. The headquarters, on the other hand, would remain in Bilbao and that of Sabadell remains suspended, which, with the 2017 referendum in Catalonia, was moved to Alicante.

Regarding the distribution of power, BBVA proposes that three current directors of Sabadell become part of the highest body management of BBVA – which has 15 members -, but no executive functionsand that one of them becomes vice president.

An offer that comes at a sweet time for Sabadell

BBVA's merger by absorption offer to Sabadell comes in a sweet moment for the Catalan bank, since after going through difficult times on the stock market in 2020, when it collapsed to a capitalization of around 1,700 million, last year it broke a record of results, with 1,331 million euros, and this year it also expected a record of profits thanks to the rise in interest rates. Furthermore, in the case of its British subsidiary, TSB, had already overcome its crisis and increased the group's profits. Currently, the stock market values ​​it at around 10,000 million.

An atomized capital without a controlling shareholder

Banco Sabadell is a financial entity with atomized capital, since, according to CNMV records, no investor exceeds 4% of the capital, so There is no controlling shareholder. This could make it difficult for the bank to defend itself in the event that a hostile takeoveralthough it may also be more difficult for those seeking support for the operation than if there are only a few shareholders who control the capital.

Blackrock owns 3.62% of the capital; for 3.495% of the Mexican investor David Martinezwhich entered the bank's capital in 2013 and is part of the board of directors, while Fintech Europe adds 3.1% and Dimensional Fund another 3%, among other investors.

A bank born in 1881 and protagonist of many integrations

Sabadell was born in 1881 and currently has 236,135 million in assets19,213 employees and 1,414 offices.

The first purchase operation that he carried out was the purchase of NatWest Spain, in 1996, and since then he has acquired many other entities: Banco Herrero (2001), Banco Atlántico (2003), Banco Urquijo (2006), Transatlantic Bank of Miami (2007 ), Banco Guipuzcoano (2010), Banco CAM (2011), the network of offices in Catalonia and Aragon of Caixa Penedès (2012), Banco Gallego and the business in Spain of Lloyds (2013) and finally the British bank TSB, in the United Kingdom United (2015).

Uncertainty about labor impact

If the integration is successful, Banc Sabadell would end its history alone and become part of BBVAand it also remains in doubt what would happen to your brand. The history of mergers shows that the absorbed always disappears: it happened when Santander integrated Central Hispano (1999), Banesto (absorbed in 2013) and Popular (2017) and CaixaBank, Bankia in 2020.

In any case, BBVA has agreed to jointly use the Banc Sabadell brand where it may have a relevant commercial interest, although when BBVA integrated Catalunya Caixa In 2015, the brand was initially maintained but then ended up being liquidated and the same thing happened with Unnim (the result of the union of the old savings banks of Sabadell, Terrassa and Manlleu), in 2013. That is one of the points that worries not only the Generalitat but to numerous representatives of the Catalan business world because the loss of the headquarters in 2017 could be added to that of the brand.

In the workplace, the question arises about what impact the merger between BBVA and Sabadell would have, because BBVA has already announced that it expects restructuring costs to amount to 1,450 million. That is why BBVA, in the letter addressed to the Sabadel board, assures that if it has to adjust the workforce it would be done through “non-traumatic measures”.

The possible merger of BBVA and Banco Sabadell would mean the creation of a financial giant with 986,924 million euros in assets, according to data from the end of the first quarter of 2024. In addition, it would have 135,462 employees and a network of 7,115 offices. Currently, Banc Sabadell has 1,414 offices and a total staff of 19,213 people, of which 13,441 in Spain.

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