How much is Banc Sabadell worth?

BarcelonaOnce the period has begun during which Banc Sabadell shareholders must decide whether or not to accept the takeover bid launched by BBVA, the big question is whether the price offered is fair or not. They have until October 7 to decide, once the Catalan bank's board of directors has approved its decision, which had until September 18 to issue its opinion. He has already stated that the proposal from the bank chaired by Carlos Torres underestimates the bank's value. and recommends that shareholders do not apply.

In any case, as is the case in all transactions between buyer and seller, the former always tries to pay as little as possible, while the latter wants to receive more and avoids offloading what it's selling for too low a price. BBVA believes its offer is "attractive" and insists on maintaining it until the end, while Sabadell, through its board of directors, believes the proposal doesn't take into account the Catalan bank's full potential. Furthermore, despite considering it "dead," they believe that, before the deadline for participating in the takeover bid expires, the Basque bank will end up improving its offer "out of common sense."

This is the specific request of Mexican investor and businessman David Martínez Guzmán, who holds 3.86% of the Catalan bank's capital and is a board member. Unlike the bank's other board members, he is asking BBVA for a "competitive offer," as he advocates for banking integrations on a European and Spanish scale. At current prices, this shareholder would lose more than €50 million if he participated in the takeover bid instead of selling directly on the market, according to the sources consulted. Some advisors explain the case of other shareholders with significant stakes who would face the same fate. Sabadell challenges the board to "find a shareholder willing to participate in a takeover bid today."

Spain and emerging economies

Analysts are convinced that BBVA has no choice but to improve its offer, given that it is largely being paid in shares, if it wants the takeover bid to be successful. "And, furthermore, a euro generated by Sabadell, which only operates in safe markets like Spain and the United Kingdom—until the sale of its TSB subsidiary to Santander closes—must be worth more than a euro obtained by BBVA, which obtains more than 60% of its profits from emerging markets like Mexico or Turkey," says one analyst. In fact, some suggest that only an improved offer of around 32.5% would be considered fair.

The market makes its estimates. And taking into account Sabadell shares, which closed the week at €3.382 on Friday (almost €17 billion in capitalization), it has set a target price of around €3.33 (approximately €16.6 billion). The highest target price, €4 per share, set by JB Capital, would imply a valuation of more than €20 billion. The lowest, by Oddo BHF, €2.90, would place the value at around €14.5 billion. The most recent target prices, by AlphaValue and Citi, estimate €3.89 and €3, respectively, which would place the value at around €19.5 billion and €15 billion.

The outlooks highlighting the potential of both banks are different. BBVA emphasizes that its shares have appreciated by 397% since January 1, 2019, when the current president, Carlos Torres, took office, and Sabadell's, 341%, above the average for European banks (221%) and Spanish banks (199%). He adds that, since the day before it became known that BBVA intended to launch a takeover bid for Sabadell, there has been "a high correlation in the share prices" of both banks, and that a good part of the Catalan bank's rise is due to the takeover bid.

At Sabadell, on the other hand, they claim that since 2020, when the other purchase attempt by BBVA was attempted – and failed –, its shares have multiplied by 12.7 times. For its part, BBVA's shares have multiplied by 7.5 times. In both cases, above the Spanish and European average. And they remember that they plan to distribute €6.3 billion to shareholders until 2027.

Sabadell reached its all-time high in 2007, with €8.53 in February of that year. Previously, a core group of shareholders had been formed in 2006, made up of the bank's president, Josep Oliu, and representatives of important families in the business world, such as the Laras (Planeta), Andics (Mango), Folch-Rusiñol (Titán), and Colonques (Porcelanosa). This alliance, created after acquiring the 12.5% stake in Sabadell from La Caixa, which had become Sabadell's largest shareholder, for €1.295 billion, dissolved in 2018 after accumulating large losses estimated at around €900 million.

Sabadell, which has been listed on the stock market since 2001, reached its lowest point during the pandemic in 2020, when its shares plummeted to less than 30 cents and a total capitalization of around €1.5 billion. That year, BBVA, which had also reached its peak in 2007 at more than €18 million, attempted to reach an agreement, but it was unsuccessful due to the price and the distribution of power. At that time, the Basque bank, which closed the week at €16.215 per share this Friday, had also hit rock bottom, at just over €2 per share.