Spanish Government Opposes BBVA’s Hostile Takeover of Banco de Sabadell, Citing Potential Harmful Effects on Financial System

In response to BBVA’s hostile takeover bid for Banco de Sabadell, Spain’s government has intervened, stating that the proposed deal “introduces potential harmful effects on the Spanish financial system” and is against it “both in form and substance.” This decision has been criticized by analysts, who note that the offer may struggle to sway shareholders, particularly given the political context ahead of regional elections in Catalonia. Sabadell is based in Catalonia and named after a city near Barcelona, and the Socialist Party, whose leader Pedro Sanchez is seeking support from pro-independence parties in the elections, could be seen to be favoring a local bank. However, BBVA’s Chairman Carlos Torres remains optimistic that the government will see the value of the transaction, although both sets of shareholders still need to be convinced of the merits of the deal, which has been described as undervaluing Sabadell’s potential and growth prospects by the bank’s board. The offer values Sabadell at a price-to-tangible-book-value of close to 1, compared to a median of 0.55 times book value in takeovers of European lenders announced over the past three years.