Sabadell CEO Sees Bid for Spanish Banking Powerhouse Deadlocked
'At this price, it's impossible for this to work,' CEO Cesar Gonzalez-Bueno said in an interview. BBVA, he said, has two options after Sabadell rejected its bid: 'Substantially improve the offer, or withdraw it.'
A rise in Sabadell's shares since BBVA made its offer in May 2024 has bolstered Gonzalez-Bueno's defense against the unsolicited bid. That stance also has a measure of support from Prime Minister Pedro Sanchez's government in Madrid.
BBVA has offered one newly-issued share and €0.70 in cash for each 5.3456 ordinary shares of Sabadell. That values Sabadell around €13.6 billion, compared with a market value of €15.6 billion. Sabadell shares have risen 70% since news of BBVA's interest broke in April 2024, outpacing its bigger rival's 20% gain and leaving its stock at a 15% premium to the offer price.
'If it wants to acquire Sabadell, we think that BBVA would have to increase the cash component to as much €1.00 per share' of Sabadell, KBW analyst Hugo Cruz said in a note. Paying 1 euro per share would translate into about €5.3 billion, according to Bloomberg calculations.
Gonzalez-Bueno hinted at obstacles to a higher offer, echoing BBVA Chairman Carlos Torres' own warning last year that he's hemmed in by the potential impact on BBVA's share price.
In its latest defensive move, Sabadell — Spain's fourth-biggest bank by assets — agreed to sell TSB, its UK unit, and pledged to return €6.3 billion ($7.4 billion) to shareholders over three years.
The tussle has parallels to Italy, where government resistance tanked UniCredit SpA's unsolicited bid for Banco BPM SpA — a setback for Chief Executive Officer Andrea Orcel's efforts to reshape Europe's financial industry. The European Commission has criticized Italy and Spain for meddling in the deals.
While government interventions risk violating European Union rules on the free movement of capital, Gonzalez-Bueno signaled he doesn't see a risk if BBVA's bid succeeds. The transaction as proposed is 'neutral' in that respect, he said.
Spain's government has told BBVA, the country's second-biggest bank, that it wouldn't be allowed to fully integrate Sabadell for at least three years if the combination went ahead. Gonzalez-Bueno said the government's condition would reduce the deal's promised synergies to 'zero.'
'It's perfectly reasonable and honorable to change your mind' when a transaction no longer makes sense, Gonzalez-Bueno said. 'I don't think Orcel's prestige has been destroyed' by Unicredit's setback, he added.
As part of its defense, Sabadell also held informal talks with Unicaja Banco SA shareholders about a combination. It also explored a potential merger with Abanca, the Expansion newspaper reported. Abanca said it's not interested.
While Sabadell is open to mergers with smaller rivals, 'I don't see them in the medium term' as 'there's no appetite,' Gonzalez-Bueno said. In contrast, he said Sabadell is seeking to expand in investment banking, 'to have the market share that corresponds to us.'
BBVA, formally known as Banco Bilbao Vizcaya Argentaria SA, is keeping it offer alive despite the government's conditions, saying they will only delay some of the synergies. BBVA's leaders have said they don't intend to boost the bank's offer for Sabadell for now.
Sabadell last week announced the payout plan and a more ambitious profitability target along with second-quarter earnings that beat analysts estimates.
The payout pledge includes a €2.5 billion extraordinary dividend from the sale of TSB, which is awaiting regulatory approval and signoff by shareholders at a meeting on Aug. 6.
'Ordinary capital creation is our best weapon' against BBVA bid, Gonzalez-Bueno said.
More stories like this are available on bloomberg.com
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