Following the rejection of its takeover proposal by Sabadell’s board, Spanish bank BBVA has taken the unprecedented step of presenting a €12.23bn ($13.11bn) offer directly to Sabadell’s shareholders. This move comes despite Sabadell’s board previously stating that the proposal significantly undervalued the bank’s potential and growth prospects. Hostile takeovers are relatively rare in European banking, although Intesa successfully completed a takeover of UBI Banca in 2020. In making the offer, BBVA’s Executive Chairman Carlos Torres Vila declared that it represented an “extraordinarily attractive offer to create a bank with greater scale in one of our most important markets.”
The proposed offer, which represents a 30% premium over Sabadell’s share price on 29th April, has been met with approval from BBVA’s CEO, Onur Genc, who believes that all stakeholders will benefit from the operation. The deal is expected to generate pre-tax cost savings of €850m. If accepted, Sabadell shareholders will own 16% of the merged entity, which BBVA hopes will surpass Caixabank to become Spain’s largest domestic lender, in terms of assets held in the country, with total assets of over €625bn.
The move comes amidst ongoing efforts by Spanish banks to find alternative sources of revenue as the impact of high interest rates wanes. BBVA’s decision to pursue Sabadell reflects a desire to refocus its operations on the domestic market, following significant expansion in other areas, including Mexico, Turkey, and South America.
Following the announcement, the US Department of Justice requested further information and documents pertaining to the deal, as part of its antitrust review. However, the European Commission had already granted approval for the deal earlier. The deal’s success hinges on the involvement of Japanese steelmaker Nippon Steel, which is raising up to $2.5bn through a combination of subordinated loans and bonds, in order to mitigate the costs associated with the deal and bolster its financial standing during the negotiations.
The move towards consolidation in the Spanish banking sector dates back to the aftermath of the 2008 financial crisis, when the number of banks operating in Spain fell from 55 to 10. The trend towards consolidation allows institutions to reduce costs and gain greater scale, providing a potential boost to competitiveness. The proposed merger between BBVA and Sabadell will represent another significant step in this direction.
Leave a Reply