BBVA shares rise 2.5% after Spain approves Sabadell bid with conditions

BBVA [BME: BBVA] shares rose 2.5% at yesterday’s close after the Spanish government approved its hostile takeover of Banco Sabadell. The approval comes with additional restrictions beyond those set by antitrust watchdog CNMC (the National Commission on Markets and Competition). 

Under the government’s conditions, Sabadell must remain a legally separate entity for at least three years, with the option to extend by two more. During that period, the banks must maintain independent governance, separate assets, and avoid layoffs linked to the deal.

The entities will not be allowed to merge until the restriction period expires. The government said the measures are proportional and necessary to safeguard the public interest.

The next step is for Spanish financial markets regulator CNMV to approve the offer prospectus, allowing Sabadell shareholders to evaluate the deal. 

The document is expected to be cleared in July. Once approved, shareholders may have up to 70 calendar days to accept the offer.

BBVA weighs legal options against conditions 

BBVA is currently reviewing the conditions imposed by the Spanish government, the bank said in a stock exchange filing yesterday. 

Before the decision was announced, BBVA Chair Carlos Torres had warned that the lender could legally withdraw its bid if the government added excessive requirements beyond those already set by competition watchdog CNMC.

Speaking ahead of the approval, Torres said he expected the government to maintain or ease the CNMC’s conditions. He also left the door open to legal action if the government took a harder line.

Next Step: BBVA's Response, Then Shareholder Decision

BBVA has yet to confirm whether it will proceed with the takeover. If it does, Sabadell shareholders will enter an acceptance period to consider the offer.

Under the terms, BBVA is offering one newly issued share and EUR 0.70 in cash for every 5.3456 Sabadell shares tendered. For example, a Sabadell investor holding 1,000 shares would receive 187 BBVA shares and EUR 130.95 in cash. 

Any fractional remainder would be paid entirely in cash. (Source: BBVA)

The offer is conditional on securing acceptance from at least 49.3% of Sabadell’s share capital.

UK Unit Sale Adds Complexity to Deal

Another factor adding uncertainty to the takeover is Sabadell’s ongoing sale process for its UK subsidiary, TSB. So far, Santander and Barclays are seen as the best positioned bidders, according to Spanish media reports.

BBVA Chair Carlos Torres said he does not believe this is the right time for Sabadell to divest itself of TSB, arguing that such a move could interfere with shareholders’ ability to properly assess the offer. 

The sale could become another reason for BBVA to walk away from the deal, he warned.

Conclusion

Despite clearing a major political obstacle, BBVA’s hostile bid for Sabadell still hangs in the balance. The bank must now decide whether to proceed under tougher-than-expected conditions, which include delayed integration and governance restrictions. 

Sabadell’s planned sale of TSB and pending shareholder approval further complicate the path ahead. The coming days will be critical in determining whether BBVA pushes forward or walks away.

*Past performance does not reflect future results