Sabadell's board rejects BBVA's improved offer, but not unanimously.

BarcelonaThe board of directors of Banc Sabadell on Tuesday rejected—without unanimity—BBVA's improved offer, after the Bilbao-based bank improved its initial offer by 10% last week. This is part of the hostile takeover bid that has been ongoing for almost a year and a half. The board of directors of the bank, chaired by Josep Oliu, met on Tuesday to consider the offer and advised its shareholders not to participate in the takeover. Banc Sabadell also announced a new dividend after the bank chaired by Carlos Torres announced a surprise record dividend of 0.32 cents to BBVA investors on Monday, which would also benefit Sabadell shareholders who accepted the takeover bid. Thus, Sabadell has announced an increase in shareholder remuneration based on 2025 results—in the form of a dividend and share buyback—to €1.45 billion, instead of the €1.3 billion previously forecast. This is due, according to the bank, to the "positive performance of the business, results, and revenue generation."

However, the Catalan bank's board of directors did not unanimously reject the takeover bid. The rejection report was approved with the votes of all Banc Sabadell directors except David Martínez Guzmán, who said he would support the takeover bid. This shareholder, who holds 3.86% of Sabadell's capital, made his decision public: "I express my gratitude to Sabadell's management team and employees for having built a solid bank with a robust future. I have decided to participate in the offer presented by BBVA because I believe that the future consolidation of both institutions in Spain will result in an even more competitive entity."

"Great attention has been paid to the offer price; in my opinion, this factor is secondary to the long-term strategic benefits of the integration of the entities," he clarified. "Likewise, I appreciate that the political interference exerted has negatively affected the consideration for this offer. In addition to holding a different conclusion than the Board regarding this transaction, I share some of the opinions and arguments expressed. For all these reasons, and based on the information available to me at this time, I have decided to participate (with my shares and those I represent) in the offer presented by BBVA," Martínez Guzmán said in the communication.

During the press conference following the meeting, when asked about Martínez's decision, Sabadell CEO César González-Bueno stated that he "doesn't see the logic" in the director's position, but that he respects it. "He's a very special investor; he's not against mergers; [David Martínez's position] wasn't a surprise," González-Bueno noted. Furthermore, regarding the possibility of a pact between BBVA and the dissident director, Chairman Josep Oliu asserted that "the report is the report" and that investigating this "is a matter for the CNMV," while also asserting that he doesn't believe "it will have any impact or generate a snowball effect" for the rest of the shareholders.

For its part, BBVA did not hesitate to celebrate David Martínez's decision. "It is a clear demonstration of the enormous appeal of both the offer and the merger project [of Sabadell] with BBVA," Carlos Torres stated in a statement to the media on Tuesday night. In the eyes of the BBVA chairman, Martínez's decision is "significant" because he is one of Sabadell's main individual shareholders, with 3.86% of the bank's share capital. Martínez joined Sabadell's board in 2014, and his move allows BBVA to reaffirm its view that the takeover bid is a "unique opportunity," in Torres' words. Contrary to what Sabadell has stated, the Bilbao-based bank, which continues to hold meetings with institutional investors, has stated that minority shareholders have already participated in the takeover bid and that some institutional investors are convinced.

"The revised offer is worse than the previous one."

According to Sabadell's report, BBVA's offer entails "distributions between 21% and 28% lower" than those of Sabadell, adding that "Sabadell's business model offers superior, recurring capital generation and distribution over the long term," derived, according to the bank, from BBVA's business model's exposure to more volatile and emerging markets. González-Bueno also reiterated that "BBVA's revised offer is worse than the previous offer," in part also "because BBVA's shares have appreciated less than Sabadell's" since the start of the takeover bid. In fact, while Sabadell has appreciated 90%, BBVA's shares have appreciated 49%.

Likewise, the CEO of Sabadell said that "the premium is nonexistent" – at the close of trading on Tuesday, it stood at 1.73% – "when in comparable successful takeover bid situations, the premium was around 40%." According to González-Bueno, this offer "does not generate value and lacks industrial sense." "The synergies (which BBVA estimates will be €900 million) will be null as long as the two banks' independence is maintained (required for at least three years), and after that, the merger is assumed and anticipated in 2028, but this practice is not guaranteed," the executive noted.

He also stated that "given the unattractiveness of the offer and Sabadell's shareholding structure, the board expects a very low acceptance rate." Thus, Oliu stated that "the bank's value is 26% above the offer made" and that "shareholders who do not participate in the takeover bid will receive the equivalent of 40% of the market capitalization over the next three years" in the form of shareholder remuneration.

Dividend War

Last week, after BBVA announced a 10% increase in the offer, the CNMV authorized the modification of the takeover bid and extended the acceptance period to October 10. The new offer offers one BBVA share for every 4.8376 Sabadell shares. Initially, one BBVA share and 0.7 euros in cash were exchanged for every 5.5483 Sabadell shares. To attract Sabadell shareholders, BBVA made a surprise announcement this Monday. the distribution of a dividend of 0.32 cents to BBVA investors This dividend will be paid immediately after the closing of the takeover bid period, "the largest dividend in its history," the bank noted. This dividend will be distributed on November 7th, also among the shareholders who participated in the takeover bid. However, if the takeover bid has been completed but not settled before November 4th of this year, the payment date will not be November 7th, but three trading days after the date on which the offer was actually settled. This way, BBVA's new shareholders are guaranteed to "participate in the dividend," according to the bank chaired by Carlos Torres.

In response to this change of script, Sabadell counterattacked by announcing an increase in its shareholder remuneration target for the 2025 financial year to €1.45 billion, up from the €1.3 billion projected so far, "an improvement that will be included in the bank's next results presentation." The Catalan bank's board explained that these distributions will be made both through cash dividend payments and through share buybacks, the final composition of which will be announced at year-end. The board also approved the distribution of a second interim dividend against the current financial year's results, in the amount of 7 gross euro cents, in cash, payable on December 29th. This is in addition to the first interim dividend against the current financial year's results, for the same amount, paid on August 29th. "Only shareholders holding shares on the trading day immediately preceding that date will be entitled to receive this remuneration," the bank warns. During the press conference, Oliu stated that "Sabadell's remuneration is incomparable to BBVA's" because "it is much higher."