Spanish bank BBVA goes hostile in Sabadell takeover bid

MADRID — Spain's second-largest bank BBVA announced Thursday a hostile takeover bid for smaller rival Banco Sabadell, a move that would create a European giant but was swiftly condemned by the government.

BBVA's new bid came three days after Sabadell's board of directors rejected a merger proposal, saying it was "not in the best interest" of the bank.

The takeover proposal values Sabadell, Spain's fourth-largest banking group in terms of capitalisation, at nearly 11.5 billion euros ($12.3 billion).

"The operation will create one of the best banks in Europe," BBVA said in a statement.

The takeover would be carried out under same conditions as the initial approach — an exchange of one new BBVA share for every 4.83 Sabadell shares, a 30 per cent premium over the April 29 closing price of both banks, BBVA said.

"We are presenting to Banco Sabadell's shareholders an extraordinarily attractive offer to create a bank with greater scale in one of our most important markets," BBVA Chair Carlos Torres Vila said in the statement.

"Together we will have a greater positive impact in the geographies where we operate, with an additional EUR5 billion loan capacity per year in Spain," he said ahead of a press conference later in the day.

A takeover would create a banking powerhouse capable of competing with Santander — Spain's leading bank — as well as with European giants such as HSBC and BNP Paribas.

But Prime Minister Pedro Sanchez's leftist government swifty came out against the takeover attempt, as did the regional government of Catalonia where Sabadell was born and where it has a strong presence.

"This hostile takeover bid by BBVA is an operation contrary to the interests of our country. It would destroy many jobs, cause financial exclusion and more oligopoly," Labour Minister Yolanda Diaz wrote on the X social media platform.

The head of the regional government of Catalonia, Pere Aragones, echoed these concerns, telling Spanish public television the takoever would "affect many jobs in Catalonia".

Aragones is facing a regional election in Catalonia on Sunday, with polls showing he is trailing.

BBVA, which also has operations in Mexico, Argentina and Turkey, is Spain's second-largest banking group in terms of capitalisation and has 74.1 million customers. 

Sabadell operates in 14 countries and has nearly 20 million customers.

The bank had said on Monday that the initial offer "significantly undervalues the potential of Banco Sabadell and its standalone growth prospects".

It added that it was "highly confident in Banco Sabadell's growth strategy and its financial targets". 

Sabadell also pointed to the recent "decline and volatility in the BBVA share price" which reflected "the uncertainty around the value of the proposal". 

BBVA then informed Sabadell in a letter that it had "no room" to improve its offer, which it considered generous.

The two banks had initially announced a plan to merge in November 2020 with the aim of better weathering the economic crisis triggered by the COVID-19 pandemic. 

But it was scrapped just 10 days later, with Sabadell saying that BBVA's offer did not reflect the real value of its business.

In the ensuing months, Sabadell undertook a major restructuring plan to slash costs that resulted in 1,800 redundancies, with BBVA going through a similar process, shedding 3,000 jobs.

Both have since recovered as has the wider Spanish banking sector which posted record profits in recent months, despite an exceptional windfall tax imposed by Spain's left-wing government to help households cope with soaring consumer prices.

BBVA posted a 19 per cent rise in first-quarter net profits to 2.2 billion euros ($2.3 billion). 

Sabadell recorded first-quarter net profits of 308 million euros, its highest ever quarterly figure, up 50 per cent from a year ago.

Spain's banking sector underwent a first wave of consolidation during the 2008 financial crisis, with the collapse of provincial savings banks which were absorbed by the bigger players. 

It underwent further consolidation in 2021 when Caixabank took over Bankia, creating Spain's third largest banking group, which was followed by Unicaja's acquisition of Liberbank creating Spain's fifth biggest domestic lender.