War drums on the bench: first hostile takeover in the sector since 1987. And as then, with an uncertain future. He BBVA announced early this Thursday its intention to launch a public takeover bid for the Sabadelljust three days after the board of directors of the Catalan entity reject the friendly operation offered by his rival and bet on continue alone, considering that the proposal “significantly undervalues” its entity. Despite this, the second Spanish bank has decided to try to convince the shareholders of the fourth with an offer that does not improve the economic conditions rejected by the administrators (30% bonus and valuation of Sabadell at 12,284 million euros, according to the price prior to the announcement of the offer). Your president, Carlos Torres Vilahas confirmed that “there is no room” to improve it.

The operation has provoked an unprecedented rejection by authorities and political parties of all kinds in the banking sector. The most relevant is that of Government: the Minister of Economy, Carlos Body, has warned that the Executive has the “last word” on the operation. It is true, but with nuances. BBVA has conditioned the offer to achieving at least the support of the 50.01% of the capital from Sabadell. If this is achieved, he will exercise his right to demand the forced sale of the remaining actions, to later carry out a fusion by absortion. It is that merger (not the takeover bid itself) that Economy can veto. If the ministry did so, it would leave BBVA in a complicated situation, with a majority share in a subsidiary bank in which could not execute all synergies (850 million a year) that make economic sense to the purchase (return on investment of 20%).

There is always the possibility, if the Executive clearly tells you of its intention to exercise the veto at the time, that BBVA desist from the opto. But in any case, Torres Vila has avoided evaluating any alternative scenario this Thursday and has reiterated again and again that trust “fully in that the Government will end appreciating the operation“He has also been sympathetic to the concern in Catalonia (where Sabadell has its operational headquarters) and Alicante (headquarters), but it has also shown confidence in clearing them. The new bank, he has argued, could give more credit (5,000 million more per year), pay more taxationand would “reinforce” its commitment to these regions.


The other authorizations that BBVA must obtain seem more feasible. One is his shareholders meeting to issue the new shares that would be exchanged for those of Sabadell. Another is that of European Central Bank (ECB), following a report from the Bank of Spain. The European supervisor ensures the financial stability and is in favor of European banks gaining size, so given the high solvency of the two banks is unlikely to object. Torres Vila, in fact, has revealed that they have already maintained contacts and has assured that for the ECB “there is no no obstacleeither; From his point of view, even a favorable view for there to be consolidation”.

The other key authorization is that of the competition authorities in the United Kingdom (by TSB, the small British subsidiary of Sabadell, which BBVA has not revealed whether it would maintain or sell) and, mainly, from Spain. The National Markets and Competition Commission (CNMC) has already approved the absorption of Bankia by CaixaBank in 2021 that gave rise to an entity larger than the BBVA-Sabadell union, with some commitments by the new entity to avoid unwanted effects in certain territories and business segments. Torres Vila has assumed that this would happen again: “Given the precedents, given that we would be the second player “With a larger one in almost all regions, segments and businesses, also the type of competition there is (for digital banks), I think the potential effects are moderate.”

Another question is what Sabadell shareholders will do. The Catalan bank has a very atomized shareholdingwith 52% investors institutional (mainly large funds) and 48% of investors retailers (of which 75% are also clients of the entity). The bank has 205,510 shareholders, but the key is what the shareholders do. 24 that control 46.62% of securities, basically the large professional investors, and the 136 who own 10.2% remaining. Torres Vila, in this sense, has assured that some of these large shareholders have already conveyed to him that are favorable to the takeover Of course, as the banker has admitted, there is always the possibility that another bank presents a counteroffer by Sabadell (he has insisted that BBVA would not improve his) or that Sabadell tries to merge with another bank smaller as a defensive move (in the recent past he has been interested Unicaja). If the operation fails, he added, he would not resign from his position despite the reputational cost: “I don't think I should consider that scenario at all.”

Same conditions

The offer involves carrying out a exchange of one BBVA share for every 4.83 Sabadell shares, which represents a 30% bonus on the closing prices of the two entities on Monday, April 29 (the day before the offer was announced) and 50% on the weighted average of the last three months. However, the evolution of the titles since then has significantly reduced said premium. With the price on Monday of last week, the Basque group valued the Catalan at around 12,284 million euros, compared to a stock market price of 9,623 million that it had before the offer was announced.

BBVA has made another effort to convince its shareholders that the absorption of Sabadell is good for them. Thus, it has assured that the profit per share will increase from the first year after the merger until reaching an improvement of 3.5% when the expected synergies are achieved. It estimates that it will achieve a reduction in operating expenses of around 850 million per year (achieved by closing offices and reducing staff in the network and central services). To do this, it will have to invest 1,450 million and its capital will be reduced by 0.3 percentage points. The price offered is very close to Sabadell's book value (2.27 euros per share), so the negative goodwill to finance these cuts will be very small.

BBVA also estimates that the tangible book value per share would increase around 1% on the date of the merger and that the operation would have a return on investment close to 20% in 2026. The figures, however, do not take into account The cost of breaking one of the bancassurance agreements of the two banks, foreseeably the one that Sabadell has had with Zurich since 2008, is taken into account.

six to eight months

BBVA plans to present the prospectus with the conditions of the operation and the request for authorization to launch it to the National Securities Market Commission (CNMV) “during the first half of the maximum period of one month established” by law. In addition to obtaining more than 50.01% support from Sabadell's capital, the purchase is conditional on achieving approval from the National Markets and Competition Commission (CNMC) and the Prudential Regulation Authority of the United Kingdom (by TSB , the British subsidiary of Sabadell), as well as for the BBVA board to approve the capital increase to generate the new shares with which the exchange will be carried out.

The operation is also subject to the duty of prior notification to the Bank of Spain and obtaining “non-opposition” from the European Central Bank (ECB). BBVA is also analyzing and does not exclude that it will also have to request authorization from the European Commission. The closing of the transaction, the bank of Basque origin estimates, would take place in a period of “between six and eight months.” Furthermore, BBVA anticipates that the technological integration between both entities would be carried out in between 12 and 18 months.

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