Carlos Torres: "An overwhelming majority of institutional investors tell us they will go for the takeover bid."

BarcelonaCarlos Torres (Salamanca, 1966) is convinced that in a few weeks he'll be able to celebrate the resounding success—over 50% acceptance—of the hostile takeover bid launched by BBVA for Sabadell, the deadline for which is next Friday. However, he believes the Catalan bank is making it difficult for its shareholders to participate in the takeover bid and has filed a complaint with the CNMV (Spanish Securities and Exchange Commission). According to Torres, the fact that Sabadell's largest individual shareholder has announced his acceptance of BBVA's offer is "enormously significant," and he denies that there has been any agreement between him and his bank.

Do you believe Sabadell has committed any illegality in the process?

— We have reported that their offices are making it difficult to accept the takeover bid. We believe this conduct has very serious consequences because it makes it difficult for shareholders, the owners, to access their assets. We want these obstacles to be removed as soon as possible, because it's urgent; there are very few days left until the end of the period. We have enabled shareholders, regardless of where their shares are deposited, to accept the offer from BBVA's offices. But that doesn't mean they shouldn't also be able to do so at the bank where they hold the shares.

David Martínez Guzmán's acceptance has had a considerable impact on his image. Has there been any agreement with this advisor?

— No, and there can't be any, because then any benefits would have to be extended to all shareholders. Furthermore, we should make public any existing agreement, and what we have is a public statement from them saying there is no agreement, and another from us, saying the same thing. There is not, nor has there ever been, an agreement with any Sabadell shareholder. Regarding David Martínez's decision, and beyond the self-serving, defamatory noise, I consider his decision enormously significant. It clearly demonstrates the enormous appeal of the offer and the project ahead. And it's very significant because David Martínez is Banco Sabadell's largest individual shareholder; he's an investment professional with strategic vision and extensive experience, and he knows Sabadell very well, having been a board member for over a decade. What's good for the largest individual shareholder, how can it not be good for all shareholders?

Sabadell has repeatedly said that BBVA's new offer is worse than the previous one. What's the positive side of it, in your opinion?

— The offer is 10% higher than the previous one, and also offers better tax benefits. The attractiveness is based on our valuation of Sabadell with this offer. Sabadell's share price has more than doubled thanks to the takeover bid, reaching historic levels. Thanks to this high valuation and the value created by the merger, the future earnings per share outlook for Sabadell shareholders is more than 40% higher than the earnings outlook they would have with a stand-alone Sabadell. In short, the terms of the exchange are tremendously favorable for Sabadell shareholders, and they also participate in the value created, which together means they can earn more money by participating in the offer. If they do nothing, they lose this unique opportunity.

Last week you announced a new interim dividend of 0.32 cents, the highest in your history…

— The dividend announcement is what we do every year. We approved it at the last meeting in September, and it's always paid in early October. This year, we had already announced that we wouldn't pay the dividend during the acceptance period [of the takeover bid], and that ends on October 10th. Therefore, this time the only difference is the payment date, which instead of being early October is November 7th, the date by which we're confident this process will be completed, and therefore the dividend doesn't interfere with the takeover bid.

It's been reported in some media outlets that 10% has already been secured. Is that correct? Do you have an estimate of the takeover bid's acceptance rate?

— We've been in direct contact with institutional investors for weeks, and the overwhelming majority have informed us of their intention to participate in the takeover bid. But their formal acceptances won't arrive until next week, as their internal processes dictate. They only participate in takeover bids last. In the retail sector, we're already recognizing acceptances, but I can't provide specific figures. The only thing we know for sure is the acceptances for the shares deposited at BBVA [approximately 2%], and of these, we've received a third, and in this respect, we're ahead of our current expectations.

How will they act if they don't reach 50%?

— We have set the condition of exceeding 50% for the takeover bid to be successful. While we have the legal possibility to waive this condition, we do not intend to do so. However, we will analyze the situation, and the board will assess the most appropriate decision at the time. If it falls below 50% and we do not waive the condition, the takeover bid will fail and end. Only if, at between 30% and 50%, BBVA decides to waive the condition and continue, will the option of launching a second mandatory takeover bid be triggered.

And in this case, what would the price be?

— Again, we're in a hypothetical scenario, because we're convinced we'll exceed 50%. In the unlikely event of a second mandatory takeover bid, Article 9 of the Royal Decree on Takeover Bids is very clear regarding the price, stating that the price must be the highest we would have paid in the preceding 12 months. And that price is the offer price. What's happening? The offer is expressed in a share exchange ratio. What the CNMV must confirm is the equivalent value in euros for that same offer. The shares must be expressed in euros, and this depends on the BBVA share price that day. But there's no doubt, first, that the existence of this second takeover bid depends on BBVA's will; no one guarantees that it will exist, and if it did, it would be an offer at the same price. So, why wait for an offer that might not happen, that if it did happen, it would be at the same price, and, on top of that, you have to wait several months for it to be settled, when the other one is now? And, what's more, you're going to pay taxes on it for sure, because it's in cash.

In this second takeover bid scenario, should BBVA raise capital to cope?

— The fact that we have to purchase an additional percentage by paying cash has an impact on capital. How much? It will depend on what additional percentage we must purchase, and it will depend on what price we must buy it at. Even in the worst-case scenarios, given the excess capital and management capabilities we have, including future generation capacity, the positive regulatory impacts we expect to come in the coming quarters, and other capital management levers, we have more than enough financial capacity.

How do you think BBVA and Sabadell shares will perform if the takeover bid fails?

— To the extent that I'm convinced that Banc Sabadell's stock is supported by our offer, once the offer is no longer valid, I foresee a downward correction in its price. On the other hand, I think it's foreseeable that BBVA's stock will have an upward trend, given that this entire process always involves uncertainties for the bidder that cause its stock to underperform, as has been the case. And I think this is quite consistent with analysts' expectations. I think Sabadell's stock has run its course. Well, I believe so, and so does David Martínez, judging by his decision.

What would be your first decision if the takeover bid is successful?

— What we would do is implement very clear communication actions, especially aimed at Banco Sabadell, its employees, and its customers, and provide peace of mind and continuity in all its activities.

And in case of failure?

— If it doesn't work out, nothing happens. We would focus on our strategic plan, which has very ambitious financial goals for 2028; we announced them in July, and they were very well received by the market—our stock price rose 8% that day. In other words, we would continue our strategic plan alone.

If the takeover is successful, what future awaits you at the top of Sabadell?

— Under the Cabinet's conditions, both banks must remain independent for at least three years, and therefore both companies must exist as independent entities. Regarding the management teams, the plan is to continue with Sabadell's management team, and for their subsequent integration, we will form an integration committee composed of executives from both entities, including the main executives of Sabadell. The board of directors is another matter; it is premature to discuss what kind of board Banco Sabadell should have, but changes in its composition are likely.

Are you afraid of a customer flight?

— This transaction is very attractive for shareholders, but it's also attractive for customers. Sabadell customers will have at their disposal a branch network that will be more than double what they have today and an ATM network that's almost triple the size, with the same managers they have today, with the same proximity. As for businesses, they have the five-year credit guarantee that we have given to SMEs and self-employed workers, which they won't have if the takeover bid doesn't go through. Furthermore, by delaying the merger by three years, we have the advantage of being able to plan the integration very well together, and do so in a way that minimizes any negative impact.

After all, would you make a hostile takeover again?

— I'd like to emphasize that what we launched in April of last year was an approach to Banc Sabadell and made a merger proposal. Once Sabadell's board rejected this transaction, we decided to present the proposal directly to the shareholders, which we believed was the right thing to do, and I still believe it's the right thing to do. There's nothing hostile about presenting a proposal to the owners, especially one as attractive as this one.

Why does BBVA maintain its interest in Sabadell, despite obstacles from the Spanish government, opposition from Catalan employers' associations, etc.?

— We believe that the merger of two banks like BBVA and Sabadell creates a better institution for everyone, enabling us to take advantage of the advantages of scale, which are increasingly important due to greater efficiency and the need for investment in technology. Being a larger bank has its own benefits: the guarantee of a broader network for customers, and greater opportunities for shareholders and employees, and also for the country as a whole. It also strengthens Catalonia as a hub for entrepreneurship, a center for attracting talent, and a key decision-making center in the financial world, given that we have committed to maintaining Sant Cugat as one of the group's headquarters. In this way, businesses will be managed from Catalonia that extend not only beyond Catalonia but also beyond Spain. In short, it is a very attractive business project.