A Summer Takeover: Guide for BBVA and Sabadell Shareholders

This text corresponds to the 'Ajuste de cuentas' newsletter where we talk about money openly, addressing small present habits that will help strengthen, financially speaking, our 'future self'.

The BBVA's takeover bid for Banco Sabadell has once again dominated headlines and conversations this week, not only in financial circles but also among families, where such information often takes a back seat to more pressing concerns like the scorching summer heat, rising hotel prices, or the chaos at Barajas airport and the railway system, which have become daily issues for citizens.

However, the plot twist in this year's banking operation deserves at least a moment of attention from the millions of shareholders of these entities, who are uncertain about the process's evolution, which, after 14 months, seems to be resolving in the middle of summer. This, besides being a nuisance for investors, involves a web of dates, appointments, and decisions that will determine the success or failure of the operation in August, a month not typically known for such business moves.

BBVA is expected to send updated information to the CNMV in the coming days for approval of the takeover bid prospectus around July 25. Once the supervisor gives the green light to the document, there will be five business days for the bank to publish the offer with its basic data and initiate the acceptance period. To avoid the final stretch falling in August, it is likely that the Basque bank will decide to extend the process until September, as it can set a period between 30 days (according to US legislation) and 70 days for shareholders of Sabadell to make their decision.

"The best course of action is to hold onto the shares in August and wait to see what happens in September, as BBVA might improve its offer," analysts suggest. It is worth remembering that, generally, in such a process, the purchasing entity tends to raise its initial offer towards the end of the exchange period. The regulations allow for an increase up to five business days before the deadline.

By then, Sabadell will have already presented its strategic plan (scheduled for July 24), and shareholders will have voted - in the middle of summer, on August 6 - on the sale of the British subsidiary TSB to Santander and the associated dividend of 2.5 billion euros. Two highly significant decisions that pose the main obstacle for BBVA to attract investors, especially retail ones, eager to receive that payout.

The market anticipates there will be. Currently, with the stock market performance of both entities, selling Banco Sabadell shares in the market is 9.2% more profitable than accepting BBVA's exchange offer of one new share plus 0.70 cents for every 5.3456 Sabadell shares. This is known as the 'negative premium'. However, it is important to note that the takeover bid was launched in May 2024, with a 30% premium over the pre-announcement stock prices of the two banks. But the scenario has changed - and significantly - since then.

If BBVA secures the necessary support to acquire Sabadell, both banks will continue to operate separately for three years, extendable to five, according to government conditions. While the merger is not yet a reality - something not guaranteed within the timeframe set by the government - there will be no changes to account numbers.

Even after a complete integration, there cannot be changes to the terms of existing mortgages or other products like deposits. However, new conditions can be set for new products or, after the merger, changes in current and remunerated accounts. Always with prior notice from the entity.