The most political week of BBVA's takeover bid for Sabadell

MadridBBVA's hostile takeover bid for Banc Sabadell is entering its most political week. This Tuesday, the Council of Ministers is expected to decide whether to add further conditions to the potential bank merger. These conditions would be required of BBVA in order to move forward with the transaction, adding to those already imposed by the National Commission on Markets and Competition (CNMC). The body chaired by Cani Fernández unanimously authorized the transaction, but subject to temporary commitments related to competition, including guaranteeing financing for SMEs, one of the key issues of the operation.

In contrast, the Spanish government can only comment on matters of general interest and, therefore, on issues such as the impact on workers, the economy, or social cohesion. Specifically, the Spanish government's decision is expected to be announced this Tuesday, the 24th, coinciding with the Sant Joan holiday in Catalonia and the Valencian Community, once the market closes (starting at 5:30 p.m.) so that the share price of both entities is not affected.

The possibility of the government expressing its opinion opened less than 30 days ago, when the Minister of Economy, Carlos Cuerpo, brought the takeover bid to the Spanish government's table, specifically to "deepen the study of the operation's potential impact on elements as important and vital to the economy as job protection, financial inclusion, and territorial cohesion," Cuerpo explained at the time. Pedro Sánchez's administration has never liked the operation. In fact, the Ministry of Labor, under the leadership of Yolanda Díaz (Sumar), has already proposed some measures such as a ban on laying off workers.

The key to what the Spanish government may say lies in the scope of the demands, should it impose them. If these significantly change BBVA's plans and cause the operation to lose value, the Bilbao-based bank could be forced to back down. In fact, this is one of the cards that those opposed to the takeover have played in recent days, from unions to Catalan business organizations, who have not hesitated to pressure Sánchez to put obstacles in the way. The same has been done by some political forces such as ERC, Junts, and the BNG, all of them investiture partners, who have also taken it upon themselves to convey their misgivings to the Moncloa Palace.

However, the Basque bank interprets it differently. BBVA Chairman Carlos Torres stated last week that the competition law only allows the Spanish government to either lower the CNMC's conditions or accept its ruling. The executive even recalled the option of taking the Council of Ministers' decision to court: "This [judicial] avenue is, of course, always available," affirmed Torres. Specifically, the agreement reached by the Council of Ministers can be appealed to the contentious-administrative division of the Supreme Court, as stipulated by law.

What does the law say? The regulation that governs the role of the Council of Ministers is the Competition Law, which stipulates that the Council of Ministers may "confirm the resolution issued by the CNMC" or "agree to authorize the concentration, with or without conditions. This agreement must be duly justified by reasons of general interest other than those of Competition."

Unprecedented

However, this would be the first time a bank takeover bid has reached this stage. The only precedent for a similar operation was the merger between Antena 3 and La Sexta. However, Mariano Rajoy's government decided to water down the Competition Authority's commitments.

Once the Spanish government's conditions are put on the table, if they are added, BBVA will have to update the transaction prospectus: the essential document for Sabadell shareholders to have all the information about the takeover. The prospectus must be approved by the National Securities Market Commission (CNMV), which it plans to do quickly because during this time it has already been sharing information with Torres' bank about the potential impact of the merger between BBVA and Sabadell.

Once the prospectus is approved, BBVA must publish it in the press within a maximum of five days, and during this time it must also inform the CNMV of its intended schedule for Sabadell shareholders, that is, the acceptance period. Once the acceptance period opens, shareholders will be the ones who will have to decide whether or not to sell their shares and, therefore, whether they support the purchase. CNMV sources explain to ARA that BBVA could request an express acceptance period of 15 days or a longer one: 30 to 70 days. Depending on this, the vote would be resolved in midsummer or just after the holiday period, in September.