He BBVA has launched a hostile takeover against Sabadell. In particular the sofa that tastes Carlos Torres has launched a public offer to acquire shares at the exact price at which it proposed a friendly merger last week, one BBVA title for every 4.83 Sabadell shares, and that The board of the Catalan bank was of the opinion that it underestimated the value of the bank the entity. This morning, Sabadell sources insisted on their rejection of the operation, referring to what was already expressed last Monday. Meanwhile, on the market, BBVA shares ended Thursday's session up 6.71%, while Sabadell's rose 3.17%.
The government is also against the operation. It categorically rejects the takeover bid, both “in the form” BBVA has chosen to launch it and “in essence,” official sources from the Ministry of Economy, Tourism and Trade said. The department led by Carlos Cuerpo believes that the takeover of Sabadell “introduces potential harmful effects” in the financial system, increases banking concentration and affects territorial cohesion. Carlos Torres, President of BBVA, responded to the Ministry of Economy during his summit with shareholders and believes that the executive's response corresponds to the political moment marked by Sunday's Catalan elections and that he is confident that his position will change.
The BBVA movement leaves the decision to the shareholders of Banco Sabadell, who will be the ones who will ultimately have to decide whether the entity is worth more alone, as the council of the Catalan group defends, or with the help of BBVA. Sabadell has no controlling shareholder, following the gradual exit of the Catalan fortunes that played that role, and the majority of its shareholding, 53%, is held by large investment funds, while the remaining 47% are investors. BBVA determines the success of the takeover bid, among other things, by obtaining 50.01% of the capital.
The shareholders of Banco Sabadell – many of whom are also present in the capital of BBVA, including large investment funds such as BlackRock or Vanguard – must therefore decide whether to accept the offer, which, according to the closing prices of the stock exchange on Wednesday, values the Catalan entity at almost 11 .6 billion euros. It carries an 18% premium to the shares' close on Wednesday, a premium that stood at 30% compared to prices before the merger rumors, and will see Sabadell shareholders take over 16% of the newly merged BBVA. The news has caught the Catalan bank's management team in a round of meetings with investors in London, precisely with the aim of enticing them to bet on the bank's solo venture. For his part, Torres told analysts that they have maintained an initial approach to Sabadell shareholders and that their view is positive.
“We present the shareholders of Banco Sabadell with an extremely attractive offer to create an entity with greater scale in one of our most important markets,” said the president of BBVA in his entity's press release. “Together we will have a greater positive impact in the areas we operate, with an additional lending capacity of 5,000 million euros per year in Spain,” he added. “All interest groups will benefit from this operation,” said BBVA CEO Onur Genç.
BBVA also provided some additional details about the operation. In concrete terms, he indicated that the planned synergies, of 850 million euros per year, will be fully activated in the third year of operation, while in the first year they will only be 25% operational. These synergies are divided into 750 million per year due to lower operating costs (offices and staff) and another 100 million due to lower financing costs. Likewise, the bank maintains its forecast of restructuring costs of 1,450 million euros, which it plans to charge in 2025 if the operation is successful.
The format of the operation, namely a takeover bid instead of a friendly merger, has an impact on the capital: the ratio will decrease by 44 basis points (compared to the expected 30) if BBVA acquires 50.01% of the capital, as the solvency rules controlling deployment. This penalty will be limited to 30 basis points when he fully integrates Sabadell. BBVA strives to be a payout (percentage of profits going to dividends and share buybacks) of between 40% and 50%, and commits to returning excess capital exceeding 12%.
The fundamental difference between a merger and a hostile takeover is the existence or not of consensus between the governing bodies of both entities: in a merger, the boards of directors agree on a common merger project which they then submit to their respective shareholders for approval present. an extraordinary meeting. The takeover bid (which can be both friendly and hostile) is an operation whose end is much more uncertain: since the bid is addressed individually to the shareholders, the result will depend on the percentage of the capital that agrees to sell their shares.
Hostilities between BBVA and Sabadell have increased at times in recent days. The entity chaired by Carlos Torres first approached in a friendly manner, with a letter to the board of directors of Sabadell proposing a full merger with this share swap, in addition to three positions on the board of directors of the resulting bank.
The bank led by Josep Oliu took about a week to respond and did so forcefully. Sabadell believes that this exchange equation, at the rate of one BBVA title for every 4.83 Sabadell shares, “significantly undervalues” the entity's project and its “growth prospects.” chose to continue independently. The Catalan bank was particularly critical of the fact that the offer did not include a cash component, making the bank's valuation dependent on the BBVA quote. Instead, it promised to return 2.4 billion euros to its shareholders within two years.
Tensions reached a peak on Wednesday. El Sabadell published one e-mail that the president received from Torres on Sunday evening, hours before the board of directors meeting at which the bank would review the offer. In it, Torres Oliu warned that BBVA has no room to improve the offer already submitted. This ended analyst speculation that supply could improve.
In this context, BBVA's move is completely unprecedented for the Spanish market, which traditionally fends off hostile takeover bids. In the banking sector, the last known bid of this type was Banco Bilbao's bid for Banesto in the 1980s, which ultimately failed. In any case, the takeover bid must be approved by the National Securities Market Commission (CNMV), the National Markets and Competition Commission (CNMC) and the European Central Bank. Once the takeover bid is completed, BBVA's intention is to merge the two entities, which will require a yes from the Ministry of Economic Affairs.
The launch of the takeover bid by BBVA, which cannot be withdrawn by law, starts a long process until its resolution, which could take more than six months. BBVA must now send all bid documentation to the CNMV within a month and this regulator has five days to process it. The CNMV then has a period of twenty days to analyze the offer. This period can be extended at will and usually lasts more than six months. Once this step is completed, which will likely occur once all other authorizations have been obtained, a bid acceptance period will begin, between 15 and 70 days.
During this time, the takeover law limits the Sabadell board's ability to defend itself. The rule requires the bank to be subject to the so-called passivity obligation, which prevents it from increasing capital or pursuing other entities to expand the bank's perimeter.
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