BBVA takes another step in its offensive to acquire Sabadell. After the initial rejection of the Catalan entity, the bank chaired by Carlos Torres has decided to launch a voluntary takeover bid (OPA) for 100% of Sabadell. An offer that contemplates practically the same economic terms as the proposal made last April 30 and which was flatly rejected by the Catalans. The reaction on the stock market has been clear, with increases for Sabadell and falls for BBVA, and also that of the Government, which has rejected the operation “both in form and substance” and has recalled that it has the last word.

As BBVA details to the National Securities Market Commission (CNMV), the consideration offered to Sabadell shareholders is one newly issued share for 4.83 shares of the Catalan bank. The takeover bid, valued at around 12 billion of euros and directed at all of Sabadell's shares, is conditioned to reaching more than 50% acceptance of the shareholders. If it goes as planned, Sabadell shareholders will have a 16% stake in the resulting entity.

The deadlines. BBVA, advised on the operation by JP Morgan SE, UBS Europe SE, Rothschild & Co, Garrigues and DWP, plans to submit the request for authorization of the takeover bid to the CNMV, along with an explanatory project and the rest of the complementary documents, in the first half of the maximum period of one month established by law from the date on which the decision to formulate the offer has been made public.

Tension between both parties has been increasing since BBVA showed its teeth a couple of weeks ago. Now, with this latest order, the Basque entity seeks to avoid going through the Sabadell council, in which its president, Josep Oliu, is campaigning for the 'no'. The ball is currently in the court of the shareholders, who will be the ones who have to speak out.

These are the difficulties of a hostile takeover that BBVA faces.

The new proposal must also go through the BBVA shareholders' meeting, as well as receive the approval of the National Markets and Competition Commission (CNMC) – which already found it complicated yesterday – and the Prudential Regulation Authority of the United Kingdom.

According to BBVA calculations, if all the steps are overcome, the merger would be completed by mid-2025. Obtaining the necessary authorizations and holding the shareholders' meeting would take between six and eight months and, from there, the bank could launch the takeover bid for Sabadell, the processing of which would take a maximum of 70 days. If it were to prosper, once BBVA assumed control of the Sabadell council, a merger offer would be presented for approval, which would require authorization from the Ministry of Economy, Commerce and Business, which would have six months to evaluate an operation. However, the Government has already expressed its opposition to the hostile takeover bid and has recalled, after communicating its refusal, that the Executive has the last word.

“We present Banco Sabadell shareholders with an extraordinarily attractive offer to create an entity with greater scale in one of our most important markets,” said Torres. “Together we will have a greater positive impact in the territories in which we operate, with an additional credit granting capacity of 5,000 million euros per year in Spain,” indicated the manager.

No sign of the vice presidency

If the union of both entities goes ahead, a Spanish banking giant would be created with a joint balance sheet of more than 1 billion euros in assets. It is estimated that the combined market capitalization of BBVA and Sabadell would be around 70 billion euros and would be close to the stock market value of Banco Santander. Regarding headquarters, Torres is committed to ensuring that the new bank has a double operational headquarters in Spain: one in the Banco Sabadell corporate center in Sant Cugat del Vallès (Barcelona) and the other in Ciudad BBVA, in Madrid.

One of the points that have disappeared compared to the initial offer is that there is no trace of a distribution of seats on the board of the resulting entity. In the first offer, BBVA offered three non-executive positions, including the vice presidency. Now there is no trace of this offer.

“Banco Sabadell has done an excellent job, with admirable progress in recent years, and now its shareholders can join an entity with a combination of growth and profitability unparalleled in Europe”

The CEO of BBVA, Onur Genç, has also spoken out in order to convince the market. “All interest groups will benefit from this operation,” stated the Turkish manager. “Banco Sabadell has done an excellent job, with admirable progress in recent years, and now its shareholders can join an entity with a combination of growth and profitability unparalleled in Europe.”

“The operation has very positive financial impacts thanks to relevant synergies and the complementarity and excellence of both entities. The transaction will give rise to one of the best European banks, with a loan share close to 22% in Spain,” indicates the firm led by Torres. In a nod to its shareholders, BBVA assures that it “will maintain its current shareholder remuneration policy and its commitment to distribute any excess capital above 12%.”

Sabadell maintains its refusal

Banco Sabadell, for its part, remains at no. Following the presentation of BBVA's voluntary takeover bid for 100% of the shares, the Catalan entity has referred to the communication of Monday, May 6 in which the board of directors already ruled out the operation on the grounds that it “significantly undervalues” the Sabadell project and its growth prospects as an independent entity.

“The board has full confidence in Banco Sabadell's growth strategy and its financial objectives and is of the opinion that its strategy as an independent entity will generate greater value for its shareholders,” said Sabadell after the meeting in which the maximum governing body evaluated BBVA's proposal, which ended up being labeled “unsolicited, indicative and conditional.”

“We cannot explain this move by BBVA”

A hostile takeover is not common in the banking sector; it has only occurred in the late 1980s when Banco de Bilbao wanted to take over Banesto and the operation failed. This unusual situation becomes rare even within the political sphere. The Government has gone from prudence to action and through the Economy Ministry has assured that it rejects BBVA's takeover bid “both in form and substance.” The portfolio led by Minister Carlos Body – who will have to give the final approval to the operation – considers that the operation would mean an increase in the level of concentration “which could have a negative impact on employment and the provision of financial services.” .

What do analysts think? Bankinter experts are very critical of this Thursday's operation. “We cannot explain this move by BBVA,” they say. In his opinion, the takeover bid will not go ahead under these terms because it offers a simple exchange of shares that, with yesterday's closings, implies a premium of just over 18%. Furthermore, they point out from the analysis house, “Sabadell's capital is atomized among investment funds that will have calculated, like us, that, contrary to what BBVA defends, according to our estimates, the merger would be slightly dilutive in 2024 and 2025 “. Renta 4 does not see the operation either and recommends not resorting to this latest BBVA offer.

Goodbye to the friendly approach

BBVA's new attempt to take over Sabadell occurs after the first merger proposal proposed from the Basque bank to the Catalan bank failed. On April 30, BBVA conveyed to Sabadell its intention to rescue a plan that already failed in 2020, when it already tried to unite the two groups.

The negotiation did not have much room for maneuver due to the harsh conditions demanded by Sabadell so that the friendly takeover bid proposed by BBVA could prosper: the offer must be entirely in cash and not in 'little papers'. BBVA offered one newly issued BBVA share for every 4.83 Sabadell shares, which translated into acquiring the Catalan entity for 2.262 euros per share, but Sabadell slammed the door on the new attempt and went so far as to publish the letter that Torres sent Oliu in which he assured him that there was no room for a better offer.

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