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Spanish lender BBVA has drawn a rebuke from the country’s government after launching a hostile bid for domestic rival Banco Sabadell.
BBVA took its all-share offer directly to Sabadell’s shareholders on Thursday after the target’s board earlier this week dismissed the bid, saying it “significantly undervalued” the bank and its prospects.
The move sets up a multibillion-euro battle in a country where there have been just a handful of hostile bids over the past quarter century.
“The government rejects BBVA’s decision to launch a hostile takeover bid for Sabadell, both in form and in substance,” said a government official, warning of “potentially damaging effects on the Spanish financial system”.
The initial offer, made last week, valued Sabadell at €12bn, but that price has since fallen as BBVA shares have declined.
Although BBVA has most of its assets in Spain, nearly half of its income last year came from Mexico — where it operates the country’s largest lender Bancomer — with another 10 per cent flowing from its Turkish business.
Spain accounted for a quarter of its earnings and acquiring Sabadell would boost its presence there. BBVA argues that Sabadell’s small business clients complement its strengths in blue-chip corporates and retail banking.
“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 said.
In launching its tender offer on Thursday, BBVA stuck to the terms that Sabadell’s board had rejected. BBVA, which is led by chief executive Onur Genc, is offering one newly issued share for every 4.83 Sabadell shares.
Shares in BBVA fell a further 5 per cent on Thursday, a drop that left the offer valuing each Sabadell share at €2.02 and the bank at €10.94bn. Shares in Sabadell climbed 4.5 per cent.
BBVA requires the acceptance of 50.1 per cent of Sabadell shareholders for the offer to succeed. It must also gain the approval of the European Central Bank and regulators in Spain, the UK and Mexico.
Francisco Riquel, analyst at Alantra Equities, said the hostile bid could turn into a “lose-lose for both banks”, but that the deal could go ahead and make sense if the banks began to negotiate and were able to agree on price.
The decision to appeal directly to shareholders marks an escalation in what was already a fractious stand-off between the banks.
Sabadell on Wednesday took the unusual step of publishing a private email sent on Sunday by Torres to its chair Josep Oliu in which BBVA indicated it would not increase its bid. “I consider that it is very important that your board of directors knows that BBVA has no room to improve its economic terms,” Torres wrote.
The deal would bring together the third- and fourth-largest banks in the Spanish market, creating a lender with the biggest domestic balance sheet. A deal would also raise questions over the future of UK high street lender TSB, which Sabadell acquired in 2015.
Mark Kelly, of MKP Advisors, said the deal was likely to be affected by regional politics. Sabadell is still seen as a Catalan bank, although its headquarters is now in Alicante, and ahead of regional elections on Sunday one pro-independence candidate has said it would be bad news to “lose” the bank.
The two banks attempted to strike a deal four years ago at the height of the pandemic, but merger talks broke down after two weeks following disagreements over pricing.
Sabadell declined to comment on BBVA’s decision to go hostile.
