He Banco Sabadell took almost a week to respond to BBVA on its merger proposal and has decided to reject it because he understands that it 'undervalues' his project. BBVA, in turn, has indicated that it “regrets that the board of Banco Sabadell has rejected such an attractive offer.”
BBVA's proposal was based on a share exchange, which would value Sabadell at almost 12,000 million euros. Specifically, he would give one newly issued share for every 4.83 shares of Banco Sabadell, as he acknowledged in a letter he sent to the board of directors of his rival and the National Securities Market Commission (CNMV).
The An attempt at integration was already made four years agoin the middle of a pandemic, and it didn't happen, as it turned out, because they disagreed on the valuation of the shares.
The reasons for rejection
Now, four years later, Sabadell again rejects the competitor's terms. He assures the CNMV that “he believes that the proposal significantly undervalues the Banco Sabadell project and its growth prospects as an independent entity.” These are also “advice [de administración] “It fully relies on Banco Sabadell's growth strategy and financial objectives” and that “as an independent entity it will generate greater value for its shareholders.”
The board, the regulator summarizes, “has concluded” that the proposal “does not meet the interests of Banco Sabadell and its shareholders” and therefore rejects it.
Casually, the entity led by Josep Oliu launches an arrow at the stock market value of its rival. “The significant decline and volatility in BBVA's share price in recent days adds additional uncertainty to the value of the proposal.” Four years ago, when they tried to merge, Sabadell was listed for 2.5 billion euros. Now it exceeds 10,000 million. Over the past year, its value on the trading floor has practically doubled. On the other hand, BBVA's market value is more than 60,000 million euros, but in the past year the revaluation was almost 17%. And if you look at the data since early April, the stock is down about 9%.
Furthermore, Sabadell winks at its shareholders. “As part of its firm commitment to creating value “for investors” and supported by the entity's business plan and solid capital generation, the board of directors reiterates its commitment to raise excess capital above 13% of CET1 on a recurring basis turn. ratio.” This is the highest quality ratio, because it relates the bank's capital to its risk-weighted assets.
“It is estimated that the excess capital that will be generated,” Sabadell, “in 2024 and 2025, together with the recurring dividends of this period in accordance with a satisfactory compliance with the current business plan, is expected to amount to 2.4 billion euros ”. However, he clarifies that “some of this may be subject to regulatory approval.”
BBVA's proposal
BBVA has indicated that it “regrets that the board of Banco Sabadell has rejected such an attractive offer.” Now it remains to be seen whether the conditions will improve to convince the Catalan entity. To begin with, the bank, chaired by Carlos Torres, urged its competitor to accept the merger, together with the proposed share exchange, in exchange for the inclusion of three members of Sabadell's governing body on the board of directors. And the resulting entity would have one of its operational headquarters in Catalonia, specifically in the Banco Sabadell business center in Sant Cugat del Vallès.
BBVA defended in that letter that “the combined entity would be solid, more efficient and a benchmark in the market in terms of the volume of assets, loans and deposits.” In concrete terms, the assets would amount to more than one trillion euros and the deposit portfolio more than 340,000 million euros.
But as a derivative, the merger would also mean that the new entity, together with Banco Santander and Caixabank, would concentrate almost two-thirds of both assets and deposits in Spain in its hands, which would increase the concentration of the sector, which has accelerated in recent years.