BBVA Re-evaluates Sabadell Takeover After Key Divestment

Bank Faces Shrunken Target and Government Restrictions

BBVA has acknowledged a significant shift in its pursuit of Sabadell Bank following the latter’s approval to sell its UK subsidiary, TSB, and distribute a €2.5 billion special dividend to shareholders. The move effectively diminishes the value of Sabadell, complicating BBVA’s long-standing takeover bid.

Synergies Questioned Amidst Regulatory Hurdles

In a filing with the National Securities Market Commission (CNMV), BBVA revealed it is “reviewing the synergies of operational and financing costs.” The bank cautioned that even if the offer succeeds, “BBVA cannot ensure that some or all expected benefits are achieved with the operation,” including anticipated cost reductions. Initially, these synergies were estimated at €850 million, a figure Sabadell’s management had deemed overly optimistic.

The bank chaired by **Carlos Torres** did not rule out withdrawing the offer entirely. BBVA stated that, subject to the CNMV’s approval, it “may give up the offer or maintain it.” This review follows earlier government-imposed conditions, which would prevent BBVA from exercising full management control over Sabadell for at least three years, potentially extending to five.

Government Restrictions Impacting Integration

BBVA admitted that negative impacts have emerged during the 15-month takeover process, most notably the government’s directive to maintain separate management for both entities. Despite this, BBVA reiterated its interest in the operation and its intention to “promote fusion as soon as possible.” However, the imposed condition will inevitably delay the realization of any derived synergies.

The bank also considered the scenario where the merger might not be authorized. In such an event, BBVA anticipates “the impossibility of materializing much of the expected benefits of the offer, including cost savings and other operational efficiencies.”

Sabadell Defends Standalone Value

Banco Sabadell has consistently argued that the takeover offer is unnecessary and that both banks would maximize their value by operating independently. BBVA countered this, asserting that “the control of Banco Sabadell and its integration into the BBVA group creates value for the shareholders of both entities.”

A failure to complete the offer, BBVA warned, could damage its reputation, leading to negative investor and customer reactions, and adversely affecting relationships with employees. Sabadell’s shareholders overwhelmingly approved the TSB sale and dividend distribution, a move described by CEO **César González-Bueno** as “a very good operation for the bank and for the shareholders.” This strategic decision has amplified market speculation about BBVA potentially improving its offer, a move the bank has thus far refused.

BBVA CEO **Onur Genç** recently dismissed the possibility of revising the offer or lowering the acceptance threshold, stating firmly, “The offer is the offer.” He added that at this juncture, “there is no guarantee of anything.” The sale of TSB by Sabadell was finalized with Santander Bank.

The Spanish banking sector has seen significant consolidation, with major players like CaixaBank merging with Bankia in 2021, creating Spain’s largest domestic bank. This landscape underscores the strategic importance of deals like the potential BBVA-Sabadell merger.