Carlos Torres, president of BBVA Miguel Toña | EFE

The operation replicates the same conditions as the offer that the Catalan bank rejected this Monday

09 May 2024 . Updated at 9:32 a.m.

Unexpected twist in the script in the relationship that has linked BBVA and Sabadell over the last four years, with the former determined to propose marriage to the latter and the latter to reject it. Early this Thursday morning, the bank chaired by Carlos Torres informed the National Stock Market Commission (CNMV) that it launches a voluntary public takeover bid (takeover bid) for the entirety of Banco Sabadell. That is, after pumpkins received on Monday by the board of directors led by Josep Oliurejecting the merger offer, BBVA has chosen to resort to a hostile takeovera legal but controversial operation, for which in Spain you must go back forty years to find precedent: again Banco Bilbao Vizcaya (BBV) over Banesto. Furthermore, in those 80s, it failed, bringing Mario Conde to the presidency of the bank.

In the early stages of the session, the market received the news of the takeover bid with falls of 4.8% for BBVA shares and increases of 5% in Sabadell shares.

Precisely the hostile takeover was the option that analysts were least inclined towards in recent days, after the Sabadell board rejected BBVA's offer, which represented a 30% premium (which the market corrected by half due to the evolution of the Catalan entity's securities last week) and an exchange of 4.83 Sabadell shares for a newly issued one. The bank's management body considered that the offer undervalued the entity and its future projectionwhile the market was betting on Torres to counterattack by improving the offer with, for example, paying partially in cash rather than with a complete share exchange.

Nothing could be further from what has happened, since the president of BBVA made it clear – via letter – that he was not going to move a single point on the offer. And that is what he has done: reiterate it but the hard way, since he will try to take over 100% of Sabadell by directly seducing retail shareholders, who account for almost half of the capital (47% specifically).

Normally, these types of operations do not usually prosper since the board of directors will recommend that the minorities not sell, and they usually listen to it. It is also worth remembering that Sabadell does not currently have controlling shareholders and that most of its capital (53%) is in the hands of large investment funds that, such as Blackrock or Vanguard, are also present in BBVA.

The market is betting that BBVA improves its offer for Banco Sabadell

Ana Balseiro

Returning to the takeover bid launched this morning, the consideration offered by BBVA to Sabadell shareholders is one newly issued share for 4.83 Sabadell shares, as detailed in the offer communicated to the CNMV. The equivalent price of the cash consideration is 2.12 euros per share of the entity of Catalan origin. Aimed at all Sabadell shares, It is conditional on achieving more than 50% shareholder acceptance. The acquisition is subject to the duty of prior notification to the Bank of Spain and to obtaining non-opposition from the European Central Bank.

“We present to the shareholders of Banco Sabadell an extraordinarily attractive offer to create an entity with greater scale in one of our most important markets,” said Carlos Torres Vila, president of BBVA, in a statement, where the entity assures that “the new The bank will have a double operational headquarters in Spain: one in the Banco Sabadell corporate center in Sant Cugat del Vallès (Barcelona) and the other in BBVA City, in Madrid. The bank chaired by Torres considers that «the integration of both entities also increases the potential of Barcelona as a European “hub” for startups. The use of the Sabadell brand will be maintained, together with the BBVA brand, in those territories or businesses in which it may have a relevant commercial interest.

What will happen now?

What is foreseeable is that the board of Banco Sabadell will meet to evaluate this movement and that they will reject this hostile takeover. From there, the most normal thing, especially after the refusal of the Catalan bank in recent days and the fact that this offer does not represent an improvement in conditions, is that the board of directors of Sabadell recommends that small shareholders not sell and, given that the Catalan bank has its capital very fragmented, the operation could become complicated for BBVA, because retailers usually pay attention to the instructions of the board of directors.

The merger of BBVA and Sabadell would unseat Santander as the second entity with the largest network of offices in Galicia

Ana balseiro

You have to go back almost 40 years in the banking history of our country to find another hostile takeover similar to this one. The year was 1987 when the Banco Bilbao launched another offer similar to this one for Banesto. The operation ended up failing and brought Mario Conde to the presidency of the entity.

The merger by absorption could give birth to the first bank in Spain

In addition to lighting a giant with more than a trillion euros in assets, The bank resulting from the merger of BBVA and Banco Sabadell would surpass CaixaBank as the largest bank in Spain, without taking into account foreign businesses, which are especially relevant in countries such as Mexico or Brazil.

Based on data at the end of March, the merged bank would have total assets in Spain of 688,363 million euros, which would put it ahead of CaixaBank, which closed the quarter with 613,457 million euros. Santander would be further away, with 468,807 million in assets in Spain. However, in the rest of the metrics and variables, CaixaBank would continue to barely hold on to first position.

If instead of looking at total assets we look at loans to customers, CaixaBank closed March with 344,697 million euros, while the balance sheets of BBVA and Sabadell add up to loans to customers of 327,353 million euros.

In deposits, CaixaBank would continue to be the guardian of Spaniards' savings, with 402,544 million euros, compared to BBVA-Sabadell's 395,902 million. Santander would continue to be lower in these two metrics, with 245,231 million in loans to clients and 319,431 million in deposits. At the end of the first quarter of the year, CaixaBank had 4,161 branches, while the eventual merged bank registered 3,084 establishments: 1,881 from BBVA and 1,172 from Banco Sabadell. In terms of number of employees, CaixaBank ended last month with a workforce of 45,005 workers, while BBVA and Sabadell's employees in Spain reached 41,634 people.

The Government rejects the hostile takeover

The first reactions to the news of the hostile takeover did not take long to arrive. The Government, which this Tuesday in the Council of Ministers appealed to prudence and “respect” for a merger operation between two private companies, this Thursday has spoken out against this new twist. “He government rejects BBVA's decision to propose a hostile takeover to Sabadell, both in form and substance,” they have pointed out from the Ministry of Economy.

Specifically, they argue that the operation “introduces potential harmful effects in the Spanish financial system”, since it would mean an increase in the level of concentration that could have a negative impact on employment and the provision of financial services, something of which they already the second vice president and Minister of Labor, Yolanda Díaz, had warned last week.

From the Economy they add that “an excessive level of concentration would introduce an additional potential risk to financial stability”, referring to what the governor of the Bank of Spain indicated the day before. Furthermore, they consider that the operation would also affect “territorial cohesion due to the presence of these financial entities in the territory.” The ministry insists that Spain currently has a “strong and solvent” financial system. “Our duty is to ensure that we maintain a solid financial system, which continues to contribute to the growth of our economy and the agenda of financial inclusion and customer protection,” they add.

Regarding Sabadell, the bank has referred to Monday's statement, insisting that the offer undervalues ​​the entity.

(News in the process of expansion)

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