Hostile Takeover: Inside BBVA’s Play for Sabadell

BBVA hostile takeover of Banco Sabadell

Image: Shutterstock/JJFarq

On May 9 2024 BBVA (Banco Bilbao Vizcaya Argentaria) presented a hostile offer to purchase the shares of Banco Sabadell directly from the shareholders without the approval of the board of Sabadell.

The potential merger of BBVA and Banco Sabadell is poised to create the largest bank in Spain, significantly impacting the European banking sector and the Spanish Banking industry. This merger is drawing considerable attention due to its scale and potential repercussions. BBVA, the second-largest bank in Spain, and Banco Sabadell, the fourth-largest, have been in talks for four years, highlighting this potential merger’s complexity and strategic nature.

Concerns for Small and Medium-Sized Enterprises

One of the major concerns surrounding the merger is its impact on small and medium-sized enterprises (SMEs) in Spain. The concentration of banks could limit access to credit facilities for these businesses, which are vital for the country’s economic growth. Banco Sabadell has a significant credit facility for SMEs in Cataluña, and there are fears that the merger could shift focus away from these smaller businesses, negatively affecting their operations and growth potential.

Strategic Differences and International Presence

While both BBVA and Banco Sabadell are Spanish banks, their focus and international presence differ. BBVA has a significant portion of its income coming from global markets, particularly Mexico, the UK, and Turkey. In contrast, Banco Sabadell is primarily focused on the Spanish market. This difference in strategy makes the potential Banco Sabadell acquisition both complex and strategically significant, as it could enhance BBVA’s domestic presence while diversifying its international portfolio.

The Hostile Takeover Bid

The BBVA takeover bid took a dramatic turn when BBVA launched a hostile takeover bid. After Banco Sabadell’s board of directors rejected the initial offer, BBVA approached the shareholders directly. This bold move is unusual in the banking sector and has not been seen in the last 40 years. For every share of BBVA, shareholders were offered 4.83 shares of Banco Sabadell. This hostile approach stresses the high stakes and strategic importance of the merger. BBVA’s CEO is confident that the takeover will be completed within six months, despite the complexities involved.

BBVA bid takeover Banco Sabadell
Image: Shutterstock/Pajor Pawel

Political and Economic Implications

The merger has significant political and economic implications, particularly in Spain. Banco Sabadell is based in Cataluña, while BBVA is headquartered in Bilbao, in the Basque Country. Both regions have strong independentist movements, adding a layer of political complexity to the merger. Additionally, the merger could lead to job losses and reduced financing for smaller businesses, raising concerns among local politicians and business leaders.

Impact on the Spanish and European Banking Landscape

If the merger goes through, it will create a banking giant with significant influence in both Spain and Europe. The combined entity would dominate the Spanish market, potentially stifling competition and leading to a more concentrated banking landscape. This concentration is at odds with the Spanish government’s goal of maintaining a diverse and competitive banking sector. However, the merger could also strengthen the European banking sector by creating a more formidable player capable of competing on a global scale.

The potential merger of BBVA and Banco Sabadell is a pivotal moment for the Spanish and European banking sectors. While the merger could create a banking behemoth with enhanced capabilities, it also raises significant concerns for SMEs, political dynamics, and market competition. As the merger discussions continue, stakeholders will be closely watching the developments and their potential impact on the financial landscape. This merger, marked by its bold strategies and high stakes, is a testament to the evolving nature of the banking industry and its far-reaching implications.

For more insights on this hostile takeover watch the following vlog from Hugo Investing

At the end of May BBVA announced a general shareholder meeting to be celebrated on July 5 with the purpose of raising capital to proceed with the purchase of Sabadell. BBVA will propose the emission of 1.126.339.845 new shares for a nominal value of 0,49 cents per share. This emission will not require any payment of the existing shareholders of BBVA.

Once BBVA obtains a participation of 50,01 per cent of the capital of Banco Sabadell, BBVA will take over control of both entities and a fusion, subject to regulatory approvals, of both banks is foreseen.

The potential merger of BBVA and Banco Sabadell is a landmark event with significant implications for investors and businesses. Stay ahead of the curve and make informed investment decisions by partnering with experts. Contact Hugo Investing today to learn how they can help you navigate these changes and capitalise on new opportunities in the financial market.

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Written by

Catherine McGeer

I am an Irish writer who has been living in Spain for the past twenty years. My writing centers around the Costa Cálida. As a mother I also write about family life on the coast of Spain and every now and then I try to break down the world of Spanish politics!