BBVA fails to convince analysts with improved offer for Sabadell

MadridBBVA's hostile takeover bid for Banc Sabadell has just entered a new stage with an improved offer through which the Basque bank wants to try to convince the Catalan bank's shareholders to accept the takeover bid.For now, it remains to be seen whether Monday's announcement will have an impact on investors and, therefore, on the outcome of a virtually unprecedented operation that began sixteen months ago. However, analysts have already spoken, and, in general, BBVA's announcement has not convinced them.

The consensus among various analysis firms is that the improved offer is insufficient and will not allow for control of more than half of the Catalan bank, as evidenced by various reports to which ARA has had access. BBVA would not reach the minimum acceptance percentage initially proposed (that 50% or more of Sabadell's share capital participate in the takeover bid), but it would have a better chance of exceeding the 30% threshold, which is the other requirement. However, this scenario isn't ideal for the Basque-based bank, as it requires it to launch a second takeover bid for Sabadell for 100% of the share capital and, therefore, an offer that includes cash.

Alantra, for example, believes the increase "is not sufficiently attractive" and points out that the target price is €3.90, 15% above the new offer. "Matching the current market price is not a catalyst," the analysts indicate. The firm also adds the disappearance of the Treasury toll with the new offer as a factor that could play in BBVA's favor, although it places the takeover bid's acceptance rate at below 50%.

JB Capital, another analyst firm, believes the 10% increase is a step forward but "not enough." They also rank the Catalan bank as their preferred option. Furthermore, the firm's analysts believe that Sabadell shareholders will receive 20% fewer dividends during the 2025-2027 period, according to their own estimates. "Even if the offer fails, which is now the most likely scenario, Sabadell offers a total return of 23% for the next nine months," they state in a report.

Public defense of the offer

Until now, BBVA hadn't expressed any doubt about the proposed offer. "The offer is the offer," the bank's CEO, Onur Genç, has said on several occasions, even referring to it as "speculation" when asked about a possibility the market was considering. Industry sources consulted by ARA directly linked this to the need to satisfy minority shareholders, who are waging a private crusade against the takeover bid with almost half of Banc Sabadell's share capital in their hands. "BBVA has worked with institutional investors [...]. It could be very tight," the same sources indicate.

The new terms represent "a more serious offer that some Sabadell shareholders might consider and that narrows the gap between success and bankruptcy," indicate Kepler analysts, who, contrary to the opinions of some firms, interpret Monday's announcement as a "surprise" due to the fact that the surprise would actually raise the price. Finally, CaixaBank BPI believes the increase falls below the 15%-20% range that this analysis firm argued should improve the initial offer. "Although the increase may give BBVA some chance of success, the offer still values Sabadell below our own valuation of €3.55 per share," they emphasized.

Until now, BBVA offered one new ordinary share of its own and 70 cents for every 5.5483 Sabadell shares. With this Monday's modification, the proposal is being converted entirely into newly issued ordinary shares of BBVA, at a ratio of one BBVA ordinary share for every 4.8376 Banc Sabadell ordinary shares. This change, according to BBVA, improves the offer by 10% and improves tax benefits for shareholders.