MADRID, Sept 22 (Reuters) – Spanish banking giant BBVA has increased its bid for smaller rival Sabadell by 10%, raising the offer to €17 billion ($19.95 billion). The move underscores BBVA’s ambition to become Spain’s second-largest bank by assets, despite ongoing regulatory and political challenges.
BBVA first approached Sabadell in April 2024, aiming to consolidate its domestic presence after years of rapid international expansion. The initial approach quickly turned hostile, prompting scrutiny from regulators and the Spanish government. Concerns over potential job losses and systemic risks led to a months-long competition review, culminating in government-imposed restrictions preventing BBVA from fully merging with Sabadell for at least three years.
The newly revised offer is entirely share-based. BBVA highlighted that shareholders accepting the offer would not face capital gains taxation in Spain, provided the tender exceeds 50% of Sabadell’s voting rights. The updated offer equates to one BBVA share for every 4.8376 Sabadell shares, valuing Sabadell at €3.39 per share—the highest price in over a decade. The previous bid had valued Sabadell at €3.084 per share, or €15.49 billion based on closing prices as of September 19.
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Sabadell’s CEO, Cesar Gonzalez-Bueno, described the enhanced offer as a “small premium,” noting it represents only a 1.6% increase from Friday’s closing price. Institutional investors had anticipated more attractive terms, he added. Since BBVA’s initial April 2024 offer, Sabadell’s shares have surged over 80%, while BBVA shares have risen roughly 50%.
“Given our significant share price appreciation since the initial takeover bid, the board is likely to reject the offer, though the final decision rests with them,” Gonzalez-Bueno told Spanish state broadcaster TVE. He also confirmed he would not tender his own shares and noted that Sabadell’s board will convene five days after the securities supervisor approves the revised terms.
The BBVA board has agreed to maintain the current deal structure without further adjustments and will not extend the 30-day acceptance period.
Market Reaction and Analyst Views
The announcement triggered a mixed market response. BBVA shares fell 3% in midday trading, while Sabadell shares declined roughly 4%. Analysts remain divided over the attractiveness of the offer.
Keefe Bruyette & Woods advised that Sabadell shareholders consider tendering their shares, noting that the improved offer has positively influenced Sabadell’s stock price. Conversely, Spanish broker Alantra suggested shareholders reject the deal, calling the 10% increase insufficient to justify acceptance.
Analysts caution that the enhanced bid will likely reduce BBVA’s expected return on investment. Under the revised offer, BBVA projects around 3% earnings-per-share (EPS) accretion in the first year following the merger, compared with previous projections of above 5%. Return on investment is expected to drop to 17%, down from over 20% under the original terms. Additionally, BBVA anticipates a capital impact of roughly minus 21 basis points at closing, or 40 basis points if Sabadell distributes a one-off dividend following the sale of its British unit, TSB.
If BBVA fails to secure the 50% shareholder acceptance threshold, it may be required to submit a follow-up offer that could include a cash alternative, potentially at a higher price. The bank has assured shareholders who have already tendered shares since the September 8 acceptance period that they will benefit from the improved terms. The take-up period will be paused until the securities regulator approves the revised bid.
Strategic Implications of the Merger
BBVA’s push to acquire Sabadell marks a pivotal moment in the Spanish banking sector. By combining operations, BBVA would solidify its position as the country’s second-largest bank, trailing only Santander. The merger would allow BBVA to leverage economies of scale, enhance digital banking capabilities, and strengthen its domestic network.
However, the deal faces headwinds from multiple fronts. Political and regulatory authorities have voiced concerns about job security, competition, and systemic risks in Spain’s banking landscape. Previous government interventions have already delayed the process and imposed restrictions, which could affect BBVA’s operational flexibility post-merger.
Sabadell, while smaller, has maintained strong regional presence and customer loyalty, making it a valuable acquisition target. The board’s cautious stance and Gonzalez-Bueno’s public rejection indicate potential negotiation challenges, suggesting the bid could face extended scrutiny before any deal is finalized.
Financial and Shareholder Considerations
For shareholders, the share-based offer provides a tax advantage while aligning incentives with BBVA’s long-term growth prospects. Nevertheless, the relatively modest premium compared to recent share price gains may reduce immediate appeal, especially for institutional investors seeking higher returns.
The market response highlights the delicate balance BBVA must maintain between offering attractive terms to Sabadell shareholders and preserving its own financial metrics. Analysts warn that overpaying could dilute earnings and strain capital ratios, while an undervalued bid risks outright rejection.
Frequently Asked Questions
What is BBVA’s new bid for Sabadell?
BBVA has raised its takeover offer for Sabadell by 10%, valuing the deal at €17 billion.
Why is BBVA acquiring Sabadell?
BBVA aims to become Spain’s second-largest bank and strengthen its domestic market presence.
Is the offer cash or share-based?
The revised offer is entirely share-based, allowing shareholders to avoid capital gains taxation if acceptance exceeds 50%.
How has the market reacted to the bid?
BBVA shares fell 3%, while Sabadell shares dropped about 4% following the announcement.
What do analysts say about the deal?
Analysts are divided; some recommend accepting the offer, while others say the 10% premium is insufficient.
What regulatory hurdles does the merger face?
The Spanish government has imposed restrictions, preventing a full merger for at least three years and scrutinizing potential job losses.
Will Sabadell shareholders benefit from the new offer?
Shareholders who already tendered their shares will enjoy improved terms, with the take-up period paused until regulatory approval.
Conclusion
BBVA’s increased €17 billion bid for Sabadell highlights its determination to reshape Spain’s banking landscape and become the country’s second-largest bank. While the share-based offer provides tax benefits for shareholders, regulatory restrictions, political concerns, and the modest premium make the outcome uncertain. Success will depend on shareholder approval, government clearance, and careful management of integration challenges.
