The Spanish government has given itself 30 days to decide whether to add conditions to the takeover bid for Sabadell.

MADRIDThe hostile takeover bid BBVA's stake in Banc Sabadell makes its final leap to the Spanish government's table. This Tuesday, with the deadline running out, the Minister of Economy, Carlos Cuerpo, decided to submit the transaction to the Council of Ministers, as announced by the ministry in a press release. The decision, which was previously communicated to the parties involved (BBVA and Banc Sabadell), was communicated after the market closed, so the share prices of both banks have not been affected, for today. This decision gives the Spanish government a period of thirty calendar days, that is, until June 27, to add conditions linked to the general interest to the transaction proposed by BBVA.

"We have conducted an internal analysis in which we have seen that we must further study the potential impact of the operation on elements as important and vital to the economy as job protection, financial inclusion, and territorial cohesion," Cuerpo explained in statements to the media on Tuesday afternoon. The five ministries that have requested this step are Industry, Labor, Social Rights, Social Security, and Ecological Transition. In fact, they will now prepare in-depth reports on the impact of the operation. The minister, however, also made it clear that Tuesday's decision "does not prejudge" what the Spanish government ultimately does. "It is about taking into account whether there are reasons of general interest other than competition reasons that justify adding additional conditions [to BBVA's takeover bid for Sabadell]," Cuerpo added.

The sector already anticipated that this would be the Spanish government's step, taking into account the minister's own statements regarding the operation. Cuerpo has always expressed "concern" about the impact that the disappearance of the fourth largest bank in the country could have on financial inclusion or access to financing. Sabadell, which has more time to defend its project alone, points out that "many organizations have shown genuine interest in the consequences of the operation." On the contrary, sources at BBVA maintain that the operation "is good" for the general interest of Catalonia, Spain, and Europe and insist that they have made "unprecedented commitments."

Submitting the takeover bid to the Council of Ministers therefore opens the door for Pedro Sánchez's administration to intervene for the first time in the takeover bid by demanding greater commitments from BBVA. However, these commitments cannot be linked to competition-related issues, which falls under the jurisdiction of the National Market and Competition Commission (CNMC), but rather to reasons of general interest, as established by the 2007 Competition Law.

What conditions can the Spanish government demand?

The regulations state that Pedro Sánchez's executive can impose conditions for reasons of general interest and the following are listed: national defense and security, protection of public safety or health, free circulation of goods and services within the national territory, environmental protection, promotion of research and technological development and ensuring adequate maintenance of its objectives.

In fact, although the public consultation on the takeover bid Although the analysis carried out by the Minister of Economy before making Tuesday's decision is not binding, its conclusions may serve Pedro Sánchez's administration when deciding whether or not to impose additional commitments, especially when justifying them if they end up doing so. Sources consulted by ARA have indicated that the government could add commitments linked to territorial or social reasons, such as Sabadell's roots in Catalonia or the possible loss of jobs, especially qualified ones; but also linked to the economic impact of the operation. BBVA, for example, has already opened the door to maintaining the Banco Sabadell brand in territories such as Catalonia.

The role of the European Commission

However, the European Commission is already considering the possibility of adding conditions. Sources within the European Commission recall that BBVA's takeover bid for Sabadell has received approval from the European Central Bank, as well as from competition authorities, such as the CNMC. "We are not aware of any reason that could justify rejecting or blocking the transaction. We hope that the Spanish government will comply with the decisions of the competent authorities," the same sources indicate. In fact, the European Commission has requested additional information from the government, thus opening a process of informal dialogue on the transaction. The same sources explain that the Commission is "examining" the compatibility of the Spanish government's actions with Community law: "[Brussels] will not hesitate to exercise its [Community] powers as guarantor of the Treaties." For some time now, but especially at a time when there is a desire to promote strategic autonomy, the European Commission has championed the need for larger banks.

Once the Spanish government's decision is known, that is, within thirty days (if the deadline expires), BBVA can proceed with the takeover bid (unless Pedro Sánchez's administration approves commitments that the Basque bank cannot afford and it backs out). It will then be the turn of the National Securities Market Commission (CNMV). The Spanish stock market regulator must approve the transaction prospectus, and then the acceptance period will open: the key vote in which Banc Sabadell shareholders will decide whether or not to sell their shares.

How did we get here?

Once the Competition Authority opened Phase 2 of the takeover bid analysis, the stage was set for reaching Phase 3, which begins now. After almost a year of studying the operation, the CNMC unanimously authorized the takeover bid, but under behavioral and competition-related conditions. These conditions include a temporary blockade of financing for SMEs, which are the Valles-based bank's flagship business.

The Competition Authority's final decision, however, did not please everyone. Aside from Sabadell, which openly criticized the CNMC's process, Catalan employers' associations, from Foment del Treball to Pimec, and the majority unions, CCOO and UGT, also criticized the public body's conclusions. CNMC President Cani Fernández did not hesitate to defend the agency's role.

In any case, given the CNMC's endorsement of the takeover bid and the possibility of Phase 3 being opened, all these actors opposed to the operation have not hesitated to put pressure on the Spanish government, demanding that it halt the BBVA takeover bid (it's worth remembering, however, the operation). Political voices have also been added: neither ERC nor Junts, the Spanish government's investiture partners, want the takeover bid. Nor does the Generalitat. Now, with the decision to send the takeover bid to the Council of Ministers, the Spanish government has one month to decide whether to deviate from the final opinion of the Competition Authority and toughen its commitments for reasons of public interest.