A 'white knight' to shake up the takeover bid for Sabadell?

MadridOne white knight To derail BBVA's hostile takeover bid for Sabadell? The question has resurfaced after various media outlets have pointed to this alternative as a way for the Vallesan bank to shield itself from the Basque bank and allow it to back down. It's a delicate move, considering that the duty of passivity restricts what a company can do against which a takeover bid has been launched, in this case Banc Sabadell, although with the endorsement of the general shareholders' meeting it would be possible.

But let's take it one step at a time. One white knight This is how investors, whether companies or individuals, are called in economic jargon, who in a friendly manner They help an entity that is in danger of being absorbed by another (this would be the case with Sabadell) in a hostile manner. How? Through a counter-bid, that is, through an operation that counteracts the previous takeover bid. However, the move would have to occur while the acceptance period has not ended. In this case, therefore, it would have to be before Banc Sabadell shareholders have voted whether or not to sell their shares to BBVA, that is, whether or not to accept the offer.

Bloomberg reported this Sunday that the Spanish government, which has shown itself to be opposed to BBVA's hostile takeover bid for Sabadell, would welcome the emergence of a white knight Spanish capital that could derail the takeover bid proposed by the Basque bank a year ago. Bloomberg assured that Pedro Sánchez's executive would be open to considering an alternative purchase to BBVA if another financial institution were to take a chance on Sabadell, and provided that Sabadell approved it. This was also advanced by The Vanguard.

In fact, the Spanish government has launched a public consultation to gather opinions before deciding whether to consider imposing additional conditions on the takeover bid beyond those of the Competition Authority. This move took the sector by surprise, especially because it is unprecedented. However, these conditions must be motivated by issues of "general interest." However, Economy Minister Carlos Cuerpo said in statements to the press at the Eurogroup meeting held this Monday in Brussels that "it is not up to the [Spanish] government" to assess the reports suggesting that Sabadell is exploring the possibility of joining Abanca or Unicaja to prevent the hostile takeover bid it has launched from coming to fruition.

In this regard, as ARA explained this Sunday, it is true that the Catalan bank aspires to grow in Spain and would be happy to lead an integration with Unicaja, strong in Andalusia, or with Abanca, in Galicia – or with both –, according to some sources consulted by this newspaper. This Monday, various media outlets echoed the information also pointing in the same direction (even speaking of "preliminary conversations"): an alternative merger with the Galician bank Abanca, according to Expansion, and another in which Unicaja would also appear, according to The Newspaper of Catalonia.

Sources at Banc Sabadell have declined to comment on what they consider "speculation," and the Ministry of Economy has also declined to comment. is focused on rolling out its current strategic plan. "We want to emphasize that we will only participate in operations that guarantee the preservation of our governance and business model, fundamental pillars of our success," the bank stressed, arguing that it has now become a "relevant player in the financial sector."

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In a scenario like this, and in the midst of an open takeover bid like BBVA's for Sabadell, there is a key factor: the "duty of passivity," which severely limits the actions that the entity that is the victim of the takeover bid can take. This duty obliges the company, and in particular its board of directors, to refrain from doing anything extraordinary that could derail the operation. However, a counter-bid could take place in this scenario, although it would require the approval of the general shareholders' meeting.

"[A board of directors] can seek a competing takeover bid. The [board of directors'] rationale is usually that if a third party can pay more, this is good for the shareholders. Therefore, not only would it not be permitted, but it is considered good action by the board of the target company," legal sources tell AR. The same sources recall that this is what Manuel Pizarro did when he was chairman of Endesa in response to the takeover bid by Gas Natural.

Previous conversations

It should be noted that in 2023 Banc Sabadell has already set its sights on Unicaja, and business sources consulted by ARA insist that this option has never been completely ruled out and that talks are ongoing. However, the idea is one thing and the facts another, the same sources clarify.

The bank chaired by Josep Oliu has never hidden its support for agreements to protect regional banks and thus prevent them from disappearing through absorption by a large bank (CaixaBank, BBVA, or Santander, for example) due to the consequences for issues such as financing for companies and households. "Bank consolidation has its limits," noted the CEO of Banco Sabadell, César González Bueno, in February.

Oliu noted in an interview with ARA in March that although the scenario Sabadell was considering was to continue alone (in case the hostile takeover by BBVA does not go through), the bank was "open" to future operations. "We want to be a business bank throughout Spain, and incorporating other banks in different regions of Spain is part of our project. We're open; the regional banks are very solvent, but at some point they may think the project has more substance, and we would be willing to consider it," Oliu stated.

However, for the Spanish government, a friendly counterbid scenario, i.e., a negotiated one, is much more favorable than a hostile takeover, not only because of the reluctance of the entity receiving the takeover bid, in this case Sabadell, but also because of the social and economic rejection that such a move entails.