Banco Santander wins the bid for Sabadell's British subsidiary

MadridAnother chapter was written this Tuesday in BBVA's hostile takeover bid for Banc Sabadell. Banco Santander won the bid to acquire 100% of TSB, the British subsidiary of the Valles-based bank, for 2.65 billion pounds (3.1 billion euros), as both entities announced in separate press releases. Santander had been a finalist alongside Barclays to acquire TSB, and after improving its initial offer (approximately 2.7 billion euros, according to Reuters), the Catalan bank's board of directors selected it as the winner. In fact, the sale would rise to 2.9 billion pounds (3.4 billion euros) if TSB's estimated profits are taken into account once the transaction closes in the first quarter of 2026, according to Sabadell.

Now, considering that the Catalan bank is immersed in the hostile takeover bid launched by BBVA, the entity chaired by Josep Oliu must call a general shareholders' meeting if it does not want to violate the duty of passivity to which it is subject in the midst of an operation of this nature. The general meeting is scheduled to be held on August 6, immediately after the presentation of the bank's strategic plan, where in addition to outlining the bank's future, the details of the agreement with Santander and its impact are expected to be included. Thus, Banc Sabadell shareholders will have the final say on the possible sale of TSB.

Shareholder Remuneration

The main incentive for the Catalan bank's shareholders to welcome the sale of a business the entity acquired ten years ago is the promised compensation. Banco Sabadell has confirmed that with the proceeds from the sale, it will pay an extraordinary cash dividend of 50 cents per share, equivalent to approximately €2.5 billion in dividends to be paid in the first quarter of 2026, when the transaction closes. This amount would be in addition to the €1.3 billion it estimates to distribute from the 2025 financial year.

"This transaction is beneficial for the entity and its shareholders, as it represents a significant creation of value, which will allow for the payment of an extraordinary dividend and maintain the capital level above the 1% reported in a statement. In 2015, Sabadell bought the British bank for €2.3 billion (£1.7 billion)." As ARA explained this Sunday, the market had a positive assessment of TSB.

The impact on the BBVA takeover bid

However, the consequences of this move on BBVA's hostile takeover bid are evident. In fact, the transaction has been interpreted as an offensive move by Sabadell, specifically to defend itself against the takeover bid. The agreement to acquire TSB comes after BBVA confirmed on Monday that it is continuing with the operation despite the additional condition imposed by the Spanish government, which requires it to keep Sabadell separate for three to five years. For BBVA, this means that the estimated cost savings from the transaction will not materialize until later. A headache that now includes the sale of the British subsidiary.

Should Santander's acquisition of TSB ultimately go through, the Bilbao-based bank will see Banco Sabadell automatically become a smaller entity because the subsidiary accounts for almost 17% of its business, something it will likely have to counter with its shareholders, who accepted the capital increase in order to launch the bid for a different bank. The United Kingdom meant gaining a foothold in a non-emerging market, which offsets the volatility of Mexico and Turkey, BBVA's two main business areas.

Santander's motives

For its part, Santander maintains that the acquisition of TSB will strengthen its exposure in the United Kingdom. "The group intends to integrate TSB into Santander UK, which would make it the third-largest bank in the country based on the current account balance of individual customers," stated the entity chaired by Ana Botín.

Furthermore, the fact that this is a purchase in a market where it already has a presence will allow it to obtain synergies or cost savings by avoiding duplication through workforce reduction, branch closures, and technological integration. "The transaction is aligned with Santander's strategy of making complementary acquisitions that accelerate organic [internal] growth in its main markets," argues Ana Botín's bank.

End of the government's role

The agreement between Santander and Sabadell comes the day after BBVA decided to maintain the hostile takeover bid despite the demands of the Spanish government and business organizations, as well as some of the investment partners, starting with ERC and Junts, to impose conditions on the transaction for reasons of general interest and in addition to those of Competition, thus complicating the outcome.

Ibex 35 banks closed the day with a drop in share price, which was more pronounced in the case of BBVA, especially during the early hours of the morning. In fact, the share price remained flat at 2.70 euros.