(News Bulletin 247) – The Spanish bank has decided to launch a public takeover offer despite the previous rejection by the Sabadell board of directors. The Spanish government intends to oppose this project.

Bank consolidation is a theme often scrutinized by the market. A few years ago, investors began to dream of a merger between Société Générale and the Italian UniCredit, a union which never materialized.

In recent days, a potential Spanish-style wedding has been livening up the market. Banco Bilbao Vizcaya Argentaria (BBVA) came out of the woods last week, showing its views on its sister company, Banco de Sabadell. At the end of April, the establishment made an offer valuing its target at around 12 billion euros. This proposal was rejected by the board of directors of Banco Sabadell, which judged that this underestimated the value creation potential of the bank.

After trying the gentle method, BBVA is trying to go through force. The Spanish bank decided this Thursday to launch a hostile takeover bid (takeover bid), that is to say without the consent of the board of directors, for Sabadell.

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Second largest bank in the country

The terms of the offer are unchanged compared to the proposal which was formulated at the end of April. BBVA is offering Banco de Sabadell shareholders one BBVA share for 4.83 Sabadell shares, which represents a 30% premium compared to the closing price on April 29, i.e. the date before BBVA submitted its offers and thus influences the course of Sabadell. Compared to Wednesday’s close, the premium amounts to 18%.

If the takeover is completed, the combined entity would become the second largest bank in Spain in terms of loan market share, with a total of 21.9%. For the moment BBVA is third (13.8%) and Sabadell fourth (8.1%).

BBVA would thus strengthen itself in Spain, where Sabadell’s assets amount to 174 billion euros, but also in the United Kingdom (55 billion euros of assets for Sabadell) and in Mexico (6.7 billion).

BBVA estimates that this acquisition should generate 850 million euros in annual synergies within three years. The operation would also have a positive impact of 3.5% on earnings per share at the end of the first year following the date of completion of the operation, according to BBVA estimates.

The Spanish government is on its way

On the Madrid Stock Exchange, BBVA shares lost 6.3%, a fairly logical reaction, with large acquisitions raising market concerns about the integration of the target. Furthermore, as the transaction is carried out in BBVA shares, dilution of existing shareholders could occur.

The Sabadell share is only up 3%, with many uncertainties surrounding the offer. The marriage is in fact far from being confirmed.

Already, the price offered by BBVA risks not convincing shareholders. “At this price, the offer is not attractive and we would not accept it,” Renta 4 analyst Nuria Alvarez told Bloomberg.

According to Agence France Presse (AFP), Sabadell has no controlling shareholder but a multitude of shareholders not exceeding 4%, including large investment funds.

Above all, the Spanish government has already expressed its opposition to this project. Quoted by AFP, Labor Minister Yolanda Diaz said the operation was against Spain’s interests and would “destroy many jobs”. The Minister of Economy Carlos Cuerpo warned for his part, on public television, that the government would have “the last word when it comes to authorizing the operation”, which he “rejects so much on the merits only on form.

In 2020, the two banks had already held discussions on a possible merger. Negotiations then broke down over the price.