The Spanish Government rejects the hostile takeover bid by BBVA to acquire Sabadell

On Thursday, May 9, the Spanish bank BBVA reported in a press release that its board of directors presents an offer to the shareholders of Banco Sabadell so that they can benefit from an “exceptionally favorable proposal.” However, The Spanish Government has rejected the offer.

“The operation offers one BBVA share for every 4.83 of Sabadell, which represents a 30% premium over the closing price of both banks on April 29, and a premium of 50% over the weighted average prices of the last three months. The operation has very positive financial impacts thanks to the relevant synergies and the complementarity and excellence of both banks,” says a BBVA statement.

BBVA also said the deal would create one of the best banks in Europe.with a loan market share close to 22% in Spain.

“In addition, BBVA will maintain its current shareholder distribution policy and its commitment to distribute any excess capital above 12%,” the bank added.

However, sources from the Ministry of Economy indicated that “an excessive level of concentration would introduce an additional potential risk to financial stability“, as also indicated by the governor of the Bank of Spain.

A sign of what’s to come in eurozone banking?

BBVA’s proposed merger with Banco Sabadell, if it goes ahead, could transform the eurozone banking sector, potentially raising BBVA’s assets to more than $1 trillion and making it the eurozone’s third-largest bank by value. market, as previously reported by ‘Euronews’ contributor Piero Cingari.

“The possible merger between BBVA and Banco Sabadell would catapult the first into the exclusive club of eurozone banks with more than a trillion dollars (940 billion euros) in total assets, placing it just behind sector giants such as BNP ParibasCrédit Agricole, Banco Santander SA, Société Générale SA and Deutsche Bank AG,” says Cingari.

Based on 2023 figures, Cingari also highlighted, this merger could potentially increase BBVA’s revenue and net profit by 17%, with a 40% increase in loans and a 22% increase in risk-weighted assets.

Chris Hallam, equity analyst at Goldman Sachsbelieves that the BBVA/Sabadell merger “would be based on solid industrial logic, given the potential for revenue and cost synergies due to the overlap of their businesses in Spain.”

Cingari noted that, despite the attractive prospects, Hallam noted the challenges posed by cross-border mergers within the eurozone, due to strict regulatory frameworks and the complexities of banking integration. This has made these large-scale mergers less likely, instead favoring consolidations within the market.

“The backdrop to this merger debate is a broader trend of the eurozone’s smaller banks, which since the beginning of the year have outperformed the larger ones,” Cingari added.

Banco Sabadell shares have risen almost 60% in the first four months of the year.