Josep Oliu (Sabadell): BBVA's takeover bid "was stillborn and all that's left is for the shareholders to bury it."

BarcelonaThe chairman of Banc Sabadell, Josep Oliu, emphasized that BBVA's takeover bid poses "risks and uncertainties" for the Catalan bank's shareholders. Along with CEO César González-Bueno and CFO Sergi Palavecino, he justified the board's opposition to BBVA's proposal. which was announced this Friday and recalled that this is the "third or fourth time" that an offer from the Basque bank has been rejected, having already tried unsuccessfully in 2020.

Oliu concluded: "They offer poor value, they don't offer a control premium, and the synergies are complicated by the competition measures and those established by the government." He added that the shareholders who participate would receive 13% of the new bank, instead of the 16% previously planned, while Sabadell's dividends will be higher and they would also become shareholders in a bank. "That takeover bid, which was stillborn, can only be buried by the shareholders," he concluded. Whether it would be revitalized is another matter, but it should increase significantly, he added.

The Catalan bank's management has emphasized that Sabadell will have more value on its own than with BBVA's offer, which they recommend shareholders do not accept. Oliu added that if they participated in the takeover bid, Sabadell shareholders "would lose money" and would also be penalized tax-wise given the adjustments to the offer due to Sabadell's dividend distribution since it was announced sixteen months ago. In fact, those who obtain capital gains They may end up paying more in personal income tax than what they will receive in cash..

"Do not accept"

Oliu reiterated that the proposal from the bank chaired by Carlos Torres, which he again described as "hostile," significantly undervalues Sabadell's value. "The best decision is not to accept it," he added, recalling that the board rejects it "unanimously." Mexican investor and businessman David Martínez Guzmán, who distanced himself from the rest of the board's considerations, called for "a more competitive price," as he advocates for banking integration in Europe and Spain.

According to González-Bueno, the offer doesn't capture Sabadell's intrinsic value nor provide a sufficient control premium. He also noted that BBVA "is a large bank, but it's not European," because 67 percent of its profits come from emerging economies, such as Mexico and Turkey. At Sabadell, meanwhile, 96 percent of its profits come from Spain, excluding the sale of the British subsidiary TSB to Banco Santander.

Shareholder remuneration

González-Bueno stated that Sabadell is now valued at 12.7 times its value when BBVA's offer was rejected in 2020. Meanwhile, BBVA is valued at 7.5 times, above the Spanish and European average. However, in Sabadell's case, value will continue to be generated with a €6.3 billion shareholder remuneration plan until 2027, he recalled.

He also insisted that BBVA's offer "destroys value" for Sabadell shareholders and doubted that the savings estimated by the Basque-based bank can be achieved, given the prohibition on a merger for at least three years, which could be as long as five. BBVA estimates that savings of €900 million will materialize in the first year of the merger, something that Sabadell considers overly optimistic.

The CFO explained the differences between the savings projected by BBVA and those Sabadell believes possible. During the period in which the merger is impossible and both banks remain autonomously managed, until 2029, BBVA estimates savings of 175 million, while Sabadell sees this as impossible and believes they will not be achieved. The Catalan bank estimates that in the years without a merger, the savings, instead of the 165 million projected by BBVA, will have a negative impact of 63 million.

Regarding earnings per share for shareholders who accept the offer, which BBVA estimates would be 25%, Sabadell believes it will be -3% in 2027 due to management autonomy.

Another risk, the CEO warned, is that BBVA might opt to acquire between 30% and 49.99% of Sabadell, instead of the 50.01% it has set for itself. In that case, BBVA would have to launch a second all-cash takeover bid, which would likely be at a higher price than what those who took advantage of the takeover bid would have received.