BBVA's takeover bid for Sabadell: A tense soap opera with three possible outcomes

BarcelonaBBVA's takeover bid for Banc Sabadell is beginning to bring to mind the writer Michael Ende and his book. The Neverending Story. Among the possibilities that this process that started 17 months ago Whether it comes to an end or not, the second option is the one that seems to have the best chance. This Friday, the National Securities Market Commission (CNMV) will announce the results. The offer acceptance period for Sabadell shareholders has expired, which could mark the end of this or even open a new chapter in this soap opera that could drag on until next year. The future of the only major bank headquartered in Catalonia is at stake.

A second part

The markets, that is, investors, analysts, managers, and others, still don't see the end of this series. Rather, they're betting on a new episode, a second part. And that will be because BBVA will at most obtain between 30% and 50% of Sabadell's capital. And that's fair enough. "Last Friday, we predicted between 28% and 33% of the capital," say some analysts consulted. And in that case, if it decides to waive the condition of obtaining more than 50% of the voting rights (it has now set it at 49.73% because it discounts treasury stock) that was imposed for the operation to be a success, it may opt for a second takeover bid. This, legally, must be in cash and at a price that the CNMV will also set this Friday and that, in theory, It could be similar to the 3.39 euros at which BBVA valued its last or more offers.. In this case, all of this will take a long time to obtain the necessary authorizations. There are many indications that this could happen.

After Sabadell announced that only 2.8% of its shareholders are also customers and have deposited their shares in the bank have agreed to the takeover bid (they represent 1.1% of the total capital). It was also learned that Bestinver sold its stake in the market and, therefore, decided not to participate in the takeover bid. The managers of Spain's largest independent fund manager, part of the Acciona group, in addition to strengthening their position in BBVA, stated that the most plausible scenario is that the Basque-based bank will remain below 50% and above 30%. Therefore, they believe it will opt for a second takeover bid at a perhaps somewhat higher price, for which they do not foresee much success. Another indication is that Sabadell shares have risen or fallen less than BBVA's during this waiting week, which analysts interpret as the market pushing for a second round.

Holding more than 30% but less than 50% would already grant BBVA the role of largest shareholder. It's unlikely anyone else will launch a takeover bid when an entity holds such a large stake. And, in this scenario, Sabadell's future will be limited to a waiting period, with potential friction regarding management, for the three years imposed by the Spanish government before carrying out a merger. And during this time, BBVA will be buying shares on the market to exceed 50%, which increases its forecasts. This, unless the Supreme Court rules in favor of BBVA before then, which overturned the prohibition imposed by the Spanish government.

The end of the story

The second alternative is that BBVA fails to reach even 30% of Banc Sabadell, a possibility that has not been ruled out at any point. If this happens, the Basque bank will abandon the project. The series will be over. It would be the second time it has failed, as happened in 2020. On some occasions, the bank's president, Carlos Torres stated that if the takeover bid is unsuccessful, "nothing will happen." and assures that BBVA will continue with its roadmap until 2028. This strategic plan includes a commitment to distribute €36 billion to its shareholders. Sabadell, for its part, has decided to focus on the Spanish market after agreeing to the sale of the British subsidiary TSB to Santander. It has also committed to maintaining a flood of profits for shareholders. In fact, it has just increased the €6.3 billion projected until 2027, and now stands at €6.45 billion.

If this situation occurs, BBVA is convinced that its share price will rise, while that of Sabadell will fall, which is valued at a level they consider linked to the takeover bid. Sabadell, on the other hand, believes that both stocks could rise, and especially the Catalan bank's shares, which would see "the bottleneck" removed, in the words of its chairman, Josep Oliu, who has assumed the takeover bid would be a positive factor for the bank's potential. In addition to the small shareholders, the second largest shareholder of the Catalan bank, Zurich insurance company, which maintains a strategic alliance with Sabadell, With 4.947% of the capital, it also announced that it would not participate in the takeover bid. And it's likely that, if each side goes its own way, there will be moves later in which Sabadell could participate with mid-market banks, such as Unicaja, Abanca, or others.

A new series

The least likely alternative, although BBVA has publicly expressed confidence in achieving it, is to raise more than 50% of the capital. The Basque bank has taken advantage of the Mexican investor's decision. David Martínez Guzmán, with 3.495% of the capital, who is also a director of Sabadell, to participate in the takeover bid as a lure for the remaining shareholders. BBVA hoped that Martínez's move would influence the rest, both small shareholders and institutional investors. It is unclear what effect this move may have had.

Should it take control of more than 50%, BBVA will have a free hand to work toward the merger, although it will have to wait a minimum of three years, unless the Supreme Court rules otherwise. In any case, the entity chaired by Torres will have a period of time to prepare the integration, although both banks will have to operate independently. And the savings expected from the merger will be delayed. BBVA states that it will only be delayed by one year, while Sabadell doubts it. In any case, the only major bank with headquarters in Catalonia will have been lost, although BBVA states that it will maintain a major operational center in Sant Cugat. Some employers' associations, which like the rest of the Catalan economic players oppose this merger, will, as a lesser evil, push for the new bank to manage the group's entire corporate banking business from Catalonia.