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BBVA Sabadell Takeover Bid: Analysis & CNMV Concerns

by Priya Shah – Business Editor
written by Priya Shah – Business Editor

BBVA Takeover Bid Faces Uncertainty as Acceptance Rate Debated

The BBVA takeover bid for Banco Sabadell is approaching a critical juncture, with predictions on acceptance rates varying widely. While BBVA ‌Chairman Carlos Torres expressed confidence in exceeding 50% acceptance, perhaps reaching​ 60%, ⁢Banco Sabadell⁤ CEO César González-Bueno believes reaching the‌ minimum 30% threshold will be “very challenging,”⁣ and even if achieved, would⁢ be a narrow ‌victory potentially jeopardizing BBVA itself.

The National Securities Market Commission (CNMV) has issued ⁢clarifications regarding the ​timeline for communicating results of the offer, responding ⁤to conflicting details. The CNMV will announce decisions stemming from the bid on the 17th, ⁢following the publication of results.

A key ‍consideration is the potential for a mandatory second takeover​ bid.If BBVA secures between 30%‍ and 50% acceptance,⁣ it can waive the ‌minimum acceptance requirement but would then be obligated to launch a‌ subsequent bid for the remaining ‌Sabadell shares, either⁤ in cash or with a ⁤cash option, at a price deemed equitable by the CNMV.The CNMV would establish the criteria for determining this equitable price, setting a floor below which BBVAS offer price could not fall.

BBVA anticipates significant participation from active investment funds, holding approximately 30% ⁢of Sabadell’s ⁣capital, and half of the passive funds, representing another 10%. Adding to ⁤this‍ is the nearly 4% stake held by David Martínez Guzmán, a ⁣Banco Sabadell proprietary director.

Currently, Martínez is the only major shareholder publicly supporting the ​bid. Zurich, another‌ significant investor, has announced it will not participate in ​the exchange.

Economist‍ Carmelo Tajadura,a former BBVA employee,has highlighted potential ​flaws in the bid’s structure and associated risks. While he predicts acceptance between 30% and 40%,he also suggests the possibility of a second bid or a prolonged ⁤battle of attrition between the two banks,ultimately detrimental to both.

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Business

BBVA reviews the risks of the OPA after the sale of TSB and does not rule out renouncing Sabadell | Economy

by Priya Shah – Business Editor
written by Priya Shah – Business Editor

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.

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Business

The BBVA retouches the OPA brochure to Sabadell and continues to consider resorting to the supreme

by Priya Shah – Business Editor
written by Priya Shah – Business Editor

El BBVA retoca en estos días el folleto de la opa al Banco Sabadell con el foco puesto en los ahorros de costes o sinergias, mientras sigue barajando si recurrir al Tribunal Supremo la prohibición del Gobierno a una fusión de las dos entidades en los próximos tres años.

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Business

Sánchez’s weakness against Illa, Junts and ERC plays in favor of Sabadell in BBVA OPA

by Priya Shah – Business Editor
written by Priya Shah – Business Editor

Sánchez Government’s Weakness Fuels BBVA-Sabadell Merger Scrutiny

The Spanish government’s fragile position, exacerbated by recent corruption allegations, has increased its reliance on regional parties, potentially influencing the proposed BBVA-Sabadell merger. This situation has placed significant pressure on the government’s decision-making process, with implications for the banking sector and Catalonia.

Political Maneuvering and Banking Sector Concerns

The Pedro Sánchez Government’s vulnerabilities, resulting from recent corruption cases within the PSOE, have amplified its dependence on key political players. This shift in power dynamics has placed the proposed merger between BBVA and Sabadell under intense scrutiny. This has resulted in the Sabadell tilting the balance in favor of political parties.

When the public consultation began a month ago, the situation in Spain was different. The final decision on the OPA was raised to the analysis of the Council of Ministers, after adding to Cerdán all the weaves of Koldo and Ábalos.

“The loss of marca Sabadell In Catalonia it would be a weapon in the hands of ERC and Junts to recover lost ground internally at the polls last year. Not to mention a possible advance of the generals.”

—Source

The banking sector is worried the proposed merger will trigger emergency conversations between the president and different political groups to secure support. This has caused the Catalan party and other partners to almost unanimously request to block the operation.

Government’s Criteria and Potential Conditions

Carlos Cuerpo, the Minister of Economy, has outlined five broad criteria of “general interest” that the government might use to impose specific conditions. These conditions may include the protection of workers and the maintenance of Sabadell’s brand in key geographical areas.

The government is planning to impose the criterion of “the protection of the workers“. The BBVA has committed to that, but the lack of detail in the offer weighs on the decision of the Executive.

Cani Fernández, president of the CNMC, during an informative breakfast of Europa Press last February.

Estimates suggest that around 2,500 workers, over 5.5% of the combined workforce of both banks, may be affected. The merger is expected to be completed through voluntary layoffs and incentivized departures.

Another government concern is “social cohesion,” which entails the preservation of Sabadell’s branches and image in its primary operating areas. This could entail the continued use of both brands for a defined duration if BBVA gains control.

Potential Outcomes and Legal Challenges

Specialists in competition law stress the need for a solid legal foundation when applying specific conditions based on these criteria. BBVA may appeal to the Supreme Court if it believes the imposed conditions are unlawful or contradict the BCE and CNMC’s prior criteria. According to a 2023 report by Deloitte, mergers and acquisitions in the European banking sector have increased by 15% compared to the previous year (Deloitte 2023).

Carlos Torres, president of BBVA, during the presentation of results of the exercise 2024.

Lawyers anticipate that any government-imposed conditions can be adjusted, along with the commitments made by BBVA regarding competition. The potential sale of Sabadell’s technology subsidiary, TSB, before shareholders vote, is the only factor outside the political analysis.

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Why the ‘Cerdán Case’ scandal complicates BBVA’s OPA to Sabadell?

by Priya Shah – Business Editor
written by Priya Shah – Business Editor

Spanish Government Navigates Murky Waters Amidst Banking Drama

Political Maneuvering and Reputational Damage Fuel Uncertainty

Spain’s political landscape faces a turbulent period as the government grapples with a contentious bank merger and accusations of political interference. The situation has sparked concern among international financial institutions and raised questions about the government’s priorities and the potential consequences of its actions.

The BBVA-Sabadell Merger: A Political Football

The proposed takeover of Sabadell Bank by BBVA has become a focal point of political maneuvering. Observers suggest the government is prioritizing its own survival, especially concerning its reliance on smaller parties for continued power. This has led to unusual moves, like a public consultation on the merger’s outcome.

“The only trick of the government president is that beyond independence, the rest of the parties, from the PSC and even the PP (only Catalan, eye), have positioned themselves without ambiguity against the operation.”

—Anonymous Source

The government’s actions have drawn criticism from various sectors, including employers’ groups and unions. Concerns about the merger’s impact on competition and consumer choice have been voiced. The European Central Bank, the International Monetary Fund, and the European Commission are all watching closely, concerned about potential reputational damage. According to a 2024 report, bank mergers can lead to increased fees for customers (Source).

The “Cerdán Case” Complicates Matters

Adding to the complexity, the “Cerdán Case” has put Pedro Sánchez in a difficult spot. The scandal has put the current government at risk. The PSOE’s dependence on Catalan independence has also multiplied its vulnerabilities, further complicating the situation. The timing of the merger is seen as particularly unfavorable, occurring close to Catalan regional elections.

Government’s Response and Potential Outcomes

The government is expected to toughen the conditions set by the National Commission of Markets and Competition (CNMC) for the merger, citing the “general interest.” However, it is possible that BBVA might withdraw from the merger to avoid a government veto. The government can only veto the merger, not the takeover itself, and this depends on the shareholders.

The reputational damage is already apparent, causing unease in Brussels, Frankfurt, Washington, and London. The main concern of these institutions is adherence to the rules. The future of the merger and the political ramifications are uncertain.

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