The CNMV authorizes BBVA's improved offer for Sabadell

MadridThe National Securities Market Commission (CNMV) has given the green light to BBVA's improved hostile takeover bid for Banc Sabadell, as announced Thursday morning, shortly before the stock market opened. With this authorization, the takeover bid acceptance period is back in operation. Banc Sabadell shareholders now have until October 10th (inclusive), instead of the 7th, to decide whether or not to accept BBVA's new offer, that is, whether to participate in the takeover bid. Both banks closed Thursday's trading session with falling stock market prices (the Ibex, in general, fell, dragged down by Wall Street): BBVA fell 1.71%, and Sabadell 0.88%.

On Monday, the bank chaired by Carlos Torres announced a modification to the offer launched for Sabadell sixteen months ago, which represents a 10% improvement. Although part of the market expected the move to happen, the modification has effectively put to rest what BBVA had defended until now: that it would not touch the initial offer.

Specifically, BBVA offered one new ordinary share of its own and 70 cents for every 5.5483 ordinary shares of Sabadell. With this Monday's modification, the proposal is moving entirely to newly issued ordinary shares of BBVA, at a ratio of one ordinary share of BBVA for every 4.8376 ordinary shares of Banc Sabadell. This change, according to BBVA, improves the offer by 10% and improves tax benefits for shareholders, who will no longer have to pay a tax to the Treasury. It therefore represents a complete about-turn in the fight to convince Sabadell shareholders to participate in the takeover bid.

"Just a plate of lentils isn't worth the effort to go ahead with a takeover bid," insisted the chairman of Banc Sabadell, Josep Oliu, in an interview with ARA published this Thursday. The bank's board of directors now has five calendar days, until Tuesday of next week, to issue a new opinion and recommendation to shareholders. It is expected to meet next week and, taking into account the public statements of the directors, reject the new offer.

When BBVA announced the increase, the CEO of the Valles-based bank, César González-Bueno, quickly called it "bad." The Valles-based bank says it is confident that this operation will not go through. In fact, they have stated that for now No client with shares has participated in the takeover bid., and which has not generated "any interest" among institutional shareholders. The main analyst firms have not seen the improvement as a stimulus either..

The possibility of a second takeover bid

The main objective behind BBVA's move is to convince Sabadell shareholders to accept the takeover bid. Minority shareholders, for example, continue to oppose the offer, and they account for almost half of the Catalan bank's capital. "A 10% increase isn't seen as a move aimed at minority shareholders; rather, I believe it's designed for institutional shareholders," an industry source told ARA.

When the acceptance period ends, the CNMV will have five business days to announce the result (between October 13 and 17). After that, with the results in hand, BBVA will have to say what it will do (it has a one-day window).

The ideal scenario for BBVA would be to reach the minimum acceptance percentage for the takeover bid (50.1% of the shares, or 49.3% of the shares if Sabadell's treasury stock is not included). If this occurs, it would only have to report that it is continuing with the merger process.

However, the bank has opened the door to withdrawing, but also to continuing, if it doesn't reach that threshold. To gain control, it would only need to acquire at least 30% of Sabadell's share capital. However, this opens up another possibility: that of a second takeover bid for Banc Sabadell.

If the takeover bid rate falls between 30% and 50% and BBVA wants to raise more capital, it is legally required to launch another takeover bid for 100% of Sabadell's capital, as it has done now, and submit a new offer. However, this time the offer would have to be in cash and could not be at any price, but rather a "fair price," overseen by the CNMV (National Securities Market Commission).

However, BBVA would have one month to launch this second takeover bid, so the timeline could be extended until the end of November. Afterward, a period for acceptance would be reopened, for example. All of this would not only further prolong the operation, but would also require a way to meet a new outlay, and BBVA would need the backing of its shareholders. In the latest supplement to the takeover bid prospectus, BBVA explained that it would finance this second offer with its "available resources." However, the economic impact will depend on the Sabadell shareholders who participate in the first takeover bid.

Juntos requests that the takeover bid not be authorized.

Juntos has urged the CNMV (Spanish National Securities Market Commission) not to authorize the takeover bid for Sabadell if the 50% stake in the first round of voting is not reached. In a statement released Thursday night, the party points out that the Spanish government's conditions "were not sufficiently strong." "This operation would harm the country's banking system, its productive economy, and SMEs," they indicate.

Sources at the supervisory body have declined to comment on the matter. In any case, if the takeover bid results in the range of 30% to 50%, BBVA is required by law to launch a second takeover bid (unless it withdraws). The only time the CNMV could intervene is at the fair price BBVA proposes for this second takeover bid, which must be validated by the body.