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The chairman of Spanish bank BBVA has said its hostile bid for rival Sabadell is “unstoppable” and should have no trouble overcoming regulatory or political challenges.
Europe’s biggest banking deal of the year is entering a key phase, with BBVA shareholders to vote at an extraordinary meeting next week on raising additional capital to support a €10 billion public tender offer.
In an interview with the Financial Times, BBVA’s executive chairman Carlos Torres said Sabadell’s board was wrong to reject his bank’s friendly approach last month. “They say it’s the economy. . . but I think they are kidding themselves,” he said.
“They have such confidence and believe that they can continue to create value and maybe they could see the integration with BBVA as a bit of a cold shower. I can empathize with that, but it’s not the right answer.’
He added: “It’s a great offer. It’s an elimination offer. It’s an incredibly rich offer.”
If BBVA’s vote to raise additional capital is approved, the bank must then wait for European and Spanish regulators to greenlight its takeover bid or seek remediation to address competition concerns.
The next stage would be to open a tender offer to Sabadell shareholders, who must sell more than 50 percent of the smaller lender’s shares for BBVA to succeed in its efforts.
The final step in the process comes with complications: Spain’s Socialist-led government must decide whether to merge the two entities and has said it will veto the merger, even though BBVA already owns Sabadell. Even if BBVA wins, the deal is unlikely to be completed before mid-2025.
Torres first approached Josep Olia, his counterpart at Sabadell, in mid-April and the offer is based on a 50% premium to Sabadell’s share price at the time. Since then, Sabadell shares have risen 28 percent and BBVA has fallen 6 percent, reducing the premium to just 7 percent.
BBVA’s chairman said the rise in Sabadell’s share price reflected investors’ expectations that his bank’s bid would succeed.
However, a person close to Sabadell said the lengthy bidding process made that outcome uncertain.
“The overwhelming opposition to the transaction from almost all stakeholder groups shows that it is far from a done deal,” they added. “The impact of any transaction on competition in an already concentrated market in Spain is at the fore for stakeholders.”
Proxy advisers ISS, Glass Lewis, Corporance and Pirc all recommended that BBVA investors vote in favor of the capital increase at Friday’s extraordinary general meeting, although each signaled their support, saying the hostile bid – a rare move in Spain – created uncertainty about closing the deal . completed.
Torres said he had received support from BBVA shareholders for the takeover, including those investors who also held stakes in Sabadell. “The value of Sabadell depends entirely on the value of our offer,” he said
The next stage of the process would be the approval of the European Central Bank and the Spanish market regulator, which is expected as there are no solvency issues.
The deal must also be considered by Spain’s antitrust authority, and Torres said he expected any amendments requested on competition grounds to be acceptable.
However, Carlos Cuerpo, Spain’s economy minister, listed competition issues among the government’s concerns, along with concerns about employment, financial stability and even Spain’s “territorial cohesion”.
While the government has the final say on the merger, Torres said, “We are confident that we can work together to resolve these issues.”
“This transaction makes sense for Spain, for Europe,” he added, pointing out that only two of the world’s 20 biggest banks by market capitalization were from Europe – HSBC and UBS – and none of them were in the EU.
“That’s why we’re pretty sure it’s a train that’s unstoppable and it’s going to happen. Not only because it is good for the shareholders, but it is good for the clients and also good for the company,” he said.