The Spanish government tightens the terms of the takeover bid for Sabadell

MadridThe Spanish government has decided to go beyond the National Commission of Markets and Competition (CNMC) with BBVA's hostile takeover bid for Banc Sabadell. Pedro Sánchez's administration has added more conditions to the transaction linked to the general interest, as explained by the Minister of Economy, Carlos Cuerpo, this Tuesday at a press conference following the Cabinet meeting. This is an unprecedented decision regarding a merger.

Given the suspicion generated by BBVA's takeover bid within the Spanish government, this move was taken for granted. The unknown, until now, was the scope of the approved conditions. In this regard, Cuerpo explained that it has been decided that for the next three years, the "legal personality and assets" of Banc Sabadell will be maintained separately, as well as "the autonomy of management in its day-to-day activities." This primarily means maintaining Sabadell as a separate bank within BBVA (a subsidiary) for three years.

Less than a month ago, and after learning of the final ruling of the CNMC authorizing the operation under conditions, The body submitted the takeover bid to the Council of Ministers allowing the central government to add conditions, which it has ended up doing. At the time, the Minister of Economy explained that they wanted to "deepen the study of the potential impact of the operation on elements as important and vital to the economy as employment protection, financial inclusion, or territorial cohesion."

In a merger operation like this, the Competition Law allows the Spanish government to impose additional conditions to those of the CNMC for reasons of general interest, but not related to competition. "The government must base itself on the general interest and on issues other than competition [if it wants to impose more conditions]," stressed the president of the CNMC, Cani Fernández, this Tuesday during her participation in the summer course organized by the Association of Economic Information Journalists (APIE) at the Menéndez Pela University, BBVA.

BBVA, as well as the Spanish National Securities Market Commission (CNMV), the Spanish stock market regulator, were keen for the Cabinet's deliberations on Tuesday to be announced after the market was closed, that is, from 5:30 p.m., so as not to affect the current market. Ultimately, this has not been the case, and the CNMV has decided to suspend trading in the banks for a few hours.

BBVA pending

Now, BBVA will have to analyze the impact of these commitments on the transaction (the bank has negotiated and accepted the Competition Authority's commitments, but in the case of the central executive, they are imposed). In particular, it will have to analyze how they affect the synergies or cost savings sought in a merger such as this. Based on this, BBVA may decide to continue with the process, although it may also back down and withdraw. In fact, those opposed to the takeover bid, including a large part of Catalan business organizations, have pushed for Pedro Sánchez's measures to have this latter scenario as an indirect effect.

If it proceeds with the transaction, it will have to add this impact to the prospectus it is negotiating with the Spanish National Securities Market Commission (CNMV), the Spanish stock market regulator. This document is essential for Banc Sabadell shareholders to have all the information about the transaction before deciding whether or not to sell their shares.

The TSB letter

However, the other issue that is straining the takeover bid is Sabadell's possible sale of its British subsidiary TSB, which represents 17% of its business. Sources consulted by ARA confirm that work is underway. Getting rid of this asset would mean: de facto, a slimming down of the entity, which would also leave a different scenario for BBVA, which this Monday reminded that it has the option to back out if this move alters its plans. So far, the only thing that has come to light is the Vallesan bank's confirmation of the analysis of offers it has received, according tohas assured the entity chaired by Josep Oliu.

However, the bank must proceed cautiously regarding its duty of passivity (not to do anything extraordinary that could derail the success of the transaction), something the CNMV is already investigating. The Spanish stock market regulator has not detected a breach of this duty "so far," although it has not yet reached final conclusions, and such a decision would have to be submitted to the general shareholders' meeting.