BBVA’s takeover bid for rival faces obstacle course
MADRID: The hostile takeover bid launched by Spanish banking giant BBVA for its smaller rival Banco Sabadell has sparked a political uproar in the country. The operation announced on Thursday would have to overcome a series of regulatory hurdles before it could be completed, making its success uncertain. Here are some of the key challenges the deal faces:
BBVA is offering an exchange of one if its shares for every 4.83 Sabadell shares, a 30-percent premium over the April 29 closing price of both banks. Sabadell has said this “significantly undervalues” its value. It accuses BBVA of breaching takeover rules since it provided “incomplete information that could affect the market”. Spain’s fourth-largest bank has reported its concerns to stock market regulator CNMV.
BBVA Chair Carlos Torres Vila played down this opposition on Thursday, saying he had been contacted by shareholders in favor of the deal. But Sabadell’s capital is held by multiple of investors, none of them holding more than 5.0 percent of the lender, making the takeover unpredictable since many players must be convinced.
Economy Minister Carlos Cuerpo has warned his leftist government “will have the last word when it comes to authorizing the operation” which he said would be “potentially damaging” for the economy.
Cuerpo did not detail what steps the government can take but Labour Minister Yolanda Diaz said Spanish banking supervision law allowed it “to authorize or not authorize this type of operation”.
This hostile takeover bid, the first in the Spanish banking sector in nearly four decades, is “extremely risky” for the economy and against the country’s “interests”, she added. The takeover bid has also come up against hostility in Catalonia, the northeastern region where Sabadell originated and has a strong presence, and the neighboring region of Valencia where it currently has its headquarters.
They both fear a reduction in the number of branches, which they say would be detrimental to businesses and individuals. Pere Aragones, a moderate separatist who heads the regional government of Catalonia, has said the takeover bid could “weaken the economic weight” of the region. The issue has been in focus in the final days of campaigning for Sunday’s regional election in Catalonia, with parties across the political spectrum voicing concerns. “For some time, there’s been a strategy to kill the Catalan banking industry,” former Catalan president Carles Puigdemont, the head of hardline separatist party JxCat who led Catalonia’s failed 2017 secession bid, wrote on X. The hostile offer “must be responded to with full force, with all the law and with all reason,” he added.
Spain’s two main trade union confederations, the UGT and Comisiones Obreras, have also sounded the alarm over possible job losses. Workers must not “pay the cost of this operation,” the UGT warned. Asked about these concerns at a news conference on Thursday, BBVA Chair Carlos Torres Vila ruled out any “traumatic measures” for employees and highlighted the career opportunities the merger would create. But he did not rule out any staff cuts. BBVA employs around 121,000 people worldwide, while Sabadell has some 19,000 workers.
The main obstacle for BBVA lies with supervisors. The operation needs the green light from the European Central Bank, Spanish stock market regulator CNMV and the competition authorities in the countries where the two lenders operate. The Spanish banking sector is already highly concentrated, with 56 percent of the market in the hands of three groups—Santander, BBVA and Caixabank.
This “rate would rise to 64 percent” if BBVA’s takeover bid is successful, which could lead to a “significant reduction in competition,” according to broker XTB. The operation will take up to eight months to complete, according to BBVA. “There is going to be a war of attrition,” economist Javier Santacruz told Spanish public radio, adding BBVA will have to do a great deal of “persuasion” to be successful.