From Competition to Moncloa: One Year Since BBVA's Takeover Bid for Banco Sabadell

30 April 2024. A leak from a British media outlet triggered one of the biggest corporate sagas—and perhaps the largest banking one—in Spain's financial history: BBVA's second attempt to acquire Banco Sabadell. The approach by Carlos Torres to his counterpart Josep Oliu, just days later on 9 May—on the eve of the Catalan elections and following the firm rejection by the Catalan bank's board—became the first hostile takeover bid in the country's banking sector in 37 years.

What followed was an unprecedented tug-of-war with harsh exchanges of accusations between both entities, as they rushed to gather numbers and arguments to convince their shareholders of the significant synergies generated by the operation, in BBVA's case, and the ability to continue generating value independently, in Banco Sabadell's case.

The relationship between the executives of both entities deteriorated as the operation progressed, which was not to the Government's liking from the start. Even less so with Salvador Illa's arrival at the Generalitat and Sabadell's decision, in January 2025, to return its headquarters to Catalonia, where much of society and the business network have also opposed the potential merger. Oliu wanted to play the final stretch of the game at home and held his last shareholders' meeting there.

The 'popular' support for Sabadell has not prevented BBVA from gradually gaining the support of supervisors and regulators for its plans, although it took much longer than expected—the bid was supposed to last six months and has already exceeded a year. After the CNMV admitted the takeover bid application in June 2024, the British supervisor's approval and the European Central Bank's (ECB) non-opposition to the offer followed after the summer.

However, it was in November when the operation took an unexpected turn—at least publicly—for the Basque bank. The National Commission on Markets and Competition (CNMC) decided to extend its analysis of the takeover bid to a second phase, detecting certain risks to competition, both in corporate and retail banking in some territories where both entities have a strong presence, such as Catalonia or the Valencian Community.

By then, BBVA had already submitted a proposal to the CNMC to guarantee credit to SMEs and financial inclusion, which is one of the Government's major concerns. Commitments that Banco Sabadell considers insufficient, estimating that only about 5% of its SME clients would benefit from them.

Finally, after five proposals from BBVA on the table, Competition decided last Wednesday to give the green light to the operation, exactly one year after Torres' first approach to Oliu. The institution focuses its report on guaranteeing service in the territories and to SMEs, with commitments negotiated with the Basque bank. In other words, perfectly manageable for the entity.

Only one change from the last proposal: instead of the plan to secure credit for companies that had all their financing with one or both entities, it has been agreed that this percentage will be 85% and 50% in Catalonia and the Balearic Islands.

Now, everything is in the hands of the Ministry of Economy, which must decide within 15 days whether to elevate the operation to the Council of Ministers. From there, another 30 days before the Government makes a decision, within its capacity to impose conditions on the takeover bid in areas outside of competition. Then, the acceptance period would open for those who truly hold the power to move the operation forward: Banco Sabadell's shareholders.

It will not be an easy vote. Especially among retail investors, who have recently seen how the stock market performance of both entities—and the adjustment of the initial exchange to include dividends paid by both banks—has kept the negative premium practically since January.

BBVA has always maintained that this adjustment is normal in such operations, reminding that the real premium is 30% if the offer is referenced to 29 April 2024, just before the operation was leaked.

But the truth is that many analysts already believe there will be an improvement in the offer, which the Basque bank currently rejects firmly. «We have neither the intention nor the need to raise the price,» stated Onur Genç, the bank's CEO, this week.

They know it is a risky move. Although it could be the definitive boost for Sabadell's shareholders to say 'yes' to the offer, an improvement could lead to a drop in BBVA's shares. In other words, what is gained on one side—the improvement of the exchange—would be lost on the other—the drop in shares.

Since 8 May—the day before the launch of the hostile takeover bid, BBVA's shares have risen by 17%, from 10.29 euros to the current 12.06 (data as of 30 April). Meanwhile, Banco Sabadell's shares have advanced by 42%, from 1.80 to the current 2.56. With this negative premium, major analysis firms are starting to crunch the numbers, especially after results that have highlighted the strong position both banks have reached in the final stretch of the operation.

In BBVA's case, its high capital levels lead firms like Citi to consider an improvement in the offer, with part in cash. And in a recent report, RBC predicted a 10% price increase to ensure its success.

In any case, everything is now in the hands of the Government. And, although the final price is very important, it is not the only concern for BBVA. Its proposal is based on achieving synergies initially estimated at 850 million euros. A figure that will likely be lower after the commitments made with Competition. And it could undermine the calculations of the entire operation if the Government ultimately decides to veto the merger.