BBVA proposes a merger by absorption of Banco Sabadell with an exchange of 1 newly issued BBVA share for every 4.83 shares of Banco Sabadell, assuming that no distributions of dividends, reserves or any other distributions would be made by any of companies to their respective shareholders. This exchange is valued at about 11.5 billion euros, 17% more than the value of Sabadell on the stock market at the close of this Tuesday, when a new attempt to create the second largest bank in Spain was confirmed.

BBVA has sent to the National Securities Market Commission (CNMV) the letter sent to the board of directors of Sabadell in which it includes the proposal for the potential merger operation between both entities.

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Proposes an exchange of 1 newly issued BBVA share for every 4.83 Banco Sabadell shares

In its communication to the stock market regulator, BBVA describes this premium as “very attractive for Sabadell shareholders”, and specifies that it would represent a premium of “30% over that corresponding to the closing prices” of both entities on April 29. the day before when his intention to propose a merger again was communicated. It also specifies that it would also represent 42% of that corresponding to the weighted average prices of the last month of both entities and 50% of those same weighted averages of the last three months of Sabadell and BBVA.

After the merger, the shareholders of the Catalan bank would have a 16% stake in the resulting entity, thus additionally benefiting from the value generated by the operation, says BBVA.

BBVA proposes that the new merged entity have double operational headquarters, in Madrid and Barcelona

According to the plans communicated by BBVA, the entity resulting from the merger would have one of its operational headquarters in Catalonia, which would be established in the corporate center that Banco Sabadell currently has in Sant Cugat (the others would be in Madrid, in BBVA City , north of the capital). Apart from the operational headquarters, BBVA has its headquarters in Bilbao, its city of origin, while Sabadell moved it to Alicante after the referendum in Catalonia in 2017.

The corporate name and brand would be those of BBVA, although the use of the Banco Sabadell brand could be maintained, together with the BBVA brand, in those regions or businesses in which it may have a relevant commercial interest, as detailed in the letter.

Regarding the distribution of power, BBVA offers that three current directors of Sabadell (chosen by common agreement between both parties) become part of the highest management body of BBVA, but without executive functions, and that one of them holds a vice presidency. .

This is the second time that a merger has been attempted between the two entities, after the frustrated negotiation at the end of 2020. The main reason for this breakup was the price, since at that time Sabadell was worth a quarter of what it is now on the stock market. . The arrival of César González-Bueno at the end of 2023 as CEO and a new strategy promoted since then, has meant that just three and a half years later the bank has a new offer from BBVA five times higher on the table.

“No traumatic measures” for the workforce

The union of both banks would mean the creation of a financial giant with 986,924 million euros in assets, with data from the end of the first quarter of 2024, they would have 135,462 employees and a network of 7,115 offices, with a presence both in Spain and in several Latin American countries. .

Regarding possible personnel adjustments, the entity indicates that “in the integration of the workforce, the principles of professional competence and merit would be respected in all cases, without the adoption of traumatic measures or measures that singularly affect employees originating from one of the the two entities”.

In this sense, it indicates that an integration committee will be established with representatives of both organizations “in order to design, with full respect for competition law regulations, the best integration process, seeking to maximize the existing talent in both entities”.

“The management team of the resulting entity would be made up of executives from both banks, based on principles of professional competence and merit, trying to maintain proportionality based on the relative weight of the businesses,” he underlines.

In its letter addressed to the board of directors of Banco Sabadell, the entity chaired by Carlos Torres emphasizes that the combination of both entities would give rise to the most attractive industrial project of European banking, with the ambition of being the largest bank by market capitalization in the Eurozone.

For BBVA, this improvement in efficiency would make the resulting bank a more “competitive and profitable entity, with growth in results in the coming years despite a macroeconomic context with prospects of lower interest rates and a foreseeable lower growth in credit investment in Europe”.

It also refers to the “strategic fit, with complementary business models” and the presence that the new entity would have in the United Kingdom, where Sabadell is already present, as well as in Mexico, Turkey and South America, where BBVA is present. .

The merger would be subject to obtaining the corresponding authorizations or declarations of non-opposition from the competent supervisors (in particular, the authorization of the head of the Ministry of Economy, Commerce and Business) and from the competition authorities with jurisdiction (in particular, the National Markets and Competition Commission).

The Government will ensure competition

For their part, sources from the Ministry of Economy have stressed that an eventual merger between BBVA and Banco Sabadell must respect the principle of competition and maintain the progress made in recent years in terms of “financial inclusion.” From the Department headed by Carlos Body they emphasize the importance of maintaining a “competitive” financial sector and emphasize that currently the sector is “healthy” and “solvent.”

Although the Executive calls for “prudence” because for now it is only talking about an announcement of this eventual merger, the same sources guarantee that the operation will be studied “through the appropriate channels.”

Specifically, they highlight that it will be analyzed by the National Markets and Competition Commission (CNMC), which will ensure “what it could affect in terms of competition” and “protecting the very important advances achieved in recent years in terms of inclusion financial”.

Yolanda Díaz affirms that the Government has the capacity to “demand employment guarantees” in the merger

On the other hand, the second vice president of the Government and Minister of Labor and Social Economy, Yolanda Díaz, has warned of the “very high degree of banking concentration” in Spain in light of the announcement of a possible merger between BBVA and Banco Sabadell and that it could become ” a systemic risk”. “We had a country in which banking concentration was 40%, today it is at 70% and, if I may say so, almost in an oligopoly regime,” Díaz stated in an interview on the network Be.

The vice president also understands that, if the operation is carried out, it will “harm” the banking service and will mean “more financial exclusion”, with a “depreciation” in the attention and public service to citizens. “Without a doubt, the quality of service is going to worsen,” she lamented.

Díaz explained that it is something that he has already discussed with his Government partners and that he will deal with this issue “intimately”, although he has advanced that the Executive has “without a doubt” the capacity to “demand employment guarantees” in if the merger between the two banking entities goes ahead.

“We are talking about a labor market with unemployed people, with processes that, in addition, normally these mergers are used to close offices and very important layoffs: they do not operate in the logic of employing or incorporating people for other functions that right now are key,” he warned.

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