Carlos Torres: "If the takeover fails, Sabadell's shares could fall."

We're on the first day of the takeover bid period. You insist that the offer for Sabadell "is what it is," but analysts say the...

— Who's guaranteeing this? Those who want it to go up. The offer is very attractive. Sabadell shareholders have a unique opportunity and 30 days to take advantage of it. It corresponds to an equivalent value for Sabadell, which is at its highest level in more than a decade. And after a very significant revaluation of the stock, following our proposal.

So, Sabadell's stock wouldn't have risen so much if it weren't for the takeover bid?

— You never know what could have happened. But the fact is that the increase has been very significant following our proposal. And shareholders now have the opportunity to convert those high values of the last decade. Furthermore, it represents an increase in earnings per share of more than 25%, compared to what it would be with Sabadell alone. And what Sabadell shareholders must also consider is what will happen or what would happen if the offer falls through, if the offer is unsuccessful.

And what would happen?

— Shareholders should consider the significant appreciation in the stock's value following our offer, the high correlation between the shares—which means Sabadell's share price is strongly supported by BBVA's proposal—and the fact that Sabadell has exhausted the appreciation potential analysts believe it has, based on target prices. Furthermore, if the offer were to fail, it would be a smaller and less diversified bank after the sale of TSB. Taking all this into account, we consider the proposal to be extremely attractive.

But how can an operation that you say is so good be so bad for so many others?

— The beauty of this is that each shareholder will decide. The best thing is that we've reached the important moment, untimely, but the important moment when it's the owner who will decide, and no one else but the owner. And it's each shareholder, each owner, who individually decides what to do with their shares. It's not a collective decision, it's not a vote; it's an individual decision by each owner who decides whether they find the proposal interesting or not.

We know there's a bit of speculation in the market, but there's almost unanimity that the offer will be improved. How do you plan to convince them?

— As you yourself have said, these are market games that will disappear when it becomes clear that the offer on the table is the final one, because it can no longer be changed.

And when will this be?

— Well, ten business days before the acceptance period ends, because the longest calendar applies here, which is the American calendar. Then, when that time passes and it becomes clear, so that it's clear that the offer is final, these market games will disappear. If you consider a scenario in which the takeover bid fails... Everyone can make their own assumptions, but we believe the support of the offer is very relevant, as demonstrated by the high correlation.

What if it doesn't succeed?

— The alternative is likely to be worse. Not because of current prices, but because of a foreseeable fall in Sabadell's shares, because they are supported by our offer.

Is this calculated? How much could it be?

— Well, this is what each shareholder must calculate to decide what to do with the shares.

And why is this operation necessary, and this is the second attempt? Is it to gain weight in Spain and lose it in Mexico or Turkey?

— This transaction has undeniable strategic logic. It responds to the current European context, where there is a significant need for investment to regain competitiveness on the continent. Europe needs to invest to be competitive, including for the energy transition and to have a presence in the technological race, not to mention defense. And all of this requires significant investments, and to finance them, there is a growing consensus that we need larger entities that can rise to the challenges facing the continent. That's why we've seen a significant influx of banking transactions since we announced our transaction. More and more investments in technology are needed. This will not stop; it will continue, even with the growing regulatory demands in this area, because we need to provide continuity of service and adequately protect data and funds from cyberattacks. This, coupled with the complementarity of both banks, is a significant success. We're talking about two banks at their best, highly complementary, and together we will be a better bank.

This is the banks' perspective, but for the customer, what are the advantages of having fewer banks?

— Well, there are enormous advantages for customers, particularly SMEs and businesses. Sabadell customers will have at their disposal a branch network more than double what they have today, an ATM network more than triple what they have today, the same managers as always with the same proximity. This will not be lost, with a broader range of products, because it is also a global, more international offering. And very importantly, with more credit, because we first provide guarantees, which no one else does. And this is fundamental for SMEs. We guarantee short-term credit to all Sabadell SMEs and self-employed workers for five years, and to the vast majority of SMEs in Catalonia. These companies will not have this if this transaction does not go through, and given the greater efficiency we will achieve together, we estimate we can allocate more than €5 billion in additional credit each year to finance the needs of families and businesses. Ultimately, the customer benefits from this because it is a better bank, offering better service and with larger, guaranteed volumes.

But with fewer offices and...

— In this office transaction, 300 offices are being closed out of a network of approximately 3,000, just under 3,000, so approximately 10%. This is not an office closure or job loss operation; it's a growth operation.

But you're planning staff adjustments. Are these quantified when the merger could take place in 2029?

— The merger won't take place until 2029, so we're not talking about the first few years. Even when the merger does occur, as I say, the impact on jobs will be less, much less than in previous transactions. Both Sabadell and BBVA have already undergone restructuring recently, and, as I say, it's not an operation based on job cuts, but rather on growth. We have, however, quantified the synergies. Of the total €900 million in annual synergies from 2029 onward, €325 million relate to personnel costs, which is a relatively small figure compared to the magnitude of the institutions' personnel costs.

But there's another element: the strong political and business opposition to the operation... They fear the disappearance of supply and credit...

— You've said it yourself: fears are just that, fears. Understandable, but unfounded. There won't be less credit, and we've proven this with the guarantees at the CNMC. In other words, it's no longer possible for that fear to materialize, because there's a guarantee that credit will continue to be maintained, and expectations of it rising, in fact.

Regarding the headquarters or the centers of...

— We have a public commitment, which I reiterate in this interview, to maintain Sant Cugat as our headquarters and as a relevant decision-making center. Of course, a relevant decision-making center in a context in which it will be even more important than today, since it will be a larger entity than it is today. Therefore, far from losing importance, the financial sector in Catalonia will gain. And I don't know what other fears there are.

The loss of the brand, perhaps...

— The Sabadell brand will be maintained, as we have maintained other commercially relevant entities. Today, we have controlled Garanti in Türkiye for over fifteen years, and it continues to be called Garanti BBVA. In Mexico, it's Bancomer.

They expect to settle for less than 50%. How does one of the scenarios in the takeover bid prospectus fit in?

— Our offer has only one condition. There were others, but they have been met, and one remains pending, and we have set it. It is not a mandatory condition; it is voluntary. We have conditioned the success of the offer on the acceptance of a majority of the voting rights, which is more than 50%. However, there is a legal possibility in Spain to waive that condition, something we have no intention of doing.

And if the takeover bid doesn't go through, do you have a plan B?

— In the strategic plan we presented on July 31, we made public the financial goals through 2028, which include maintaining a sustained return on equity above 20%, 22%, an expected increase in the equity value of our shareholders of 15% each year, which is also a figure that's at the forefront. 0, and then the figure of 4 million, and then the 8, and then the figure of 4 million. Distribution to our shareholders of €36 billion in dividends and share buybacks, very strong figures. These are very good figures on this individual level, and that's why I say it's okay if the takeover bid doesn't go through. We want to carry out this operation; we think it's interesting and strategic, but if the shareholders decide not to, since they are sovereign—that's what the market is all about—then we have a plan.

There are many small shareholders who oppose the transaction because they are also Sabadell customers. What message do you send them?

— I return to what I was saying before: this transaction is good for the shareholder and it's good for the customer. So, what this transaction offers is a credit guarantee and the prospect of having a stronger bank providing its services. In other words, the two proposals are not incompatible, and it's a commitment to Catalonia. We are a bank with a strong presence here, and we believe in this region, in its potential, its business dynamism, its innovative nature... In the last four and a half years, our financing to the corporate world has grown by 22%, while the system as a whole has fallen by 3.5%. We are the bank that attracts the most SMEs each year, by far; one in four SMEs that join the banking system in Spain becomes a BBVA customer, significantly different from the next competitor. In Catalonia, more than one in three.

And isn't there a successful pairing of the takeover bid and Carlos Torres? Isn't Carlos Torres linked to achieving success in that operation, which he already attempted in 2020?

— No. This shouldn't be personalized. This is a business project. I am the chairman of the board. But the project is a BBVA project. It belongs to the entire management team and the entire board. And it was approved with great support by the Shareholders' Meeting. With 96% support.

And is the council's vision unanimous?

— The board members did make unanimous decisions. And if the takeover bid ultimately doesn't go through because Sabadell's shareholders decide against it, although I believe they have a unique opportunity they should seize, that's also very respectable. We would have tried to create a project that would have added value, but that wouldn't matter; we would continue on our path.

Back to the offer: can we open any doors to improving it?

When we launched the offer, the premium was 42% compared to the April price, the month before the talks became known. In other words, the price wasn't influenced by all the news that followed. 42%. You could say this was a year ago, but it's very important to keep this in mind. The 42% premium compared to subsequent takeover bids. Of which there have been five or six. The comparable premiums in the previous month were 10% or 12%. At the time, it was a merger proposal. We were in merger talks, and that's why we were approaching the offer at very high levels. Rejected by Sabadell's board, we decided to pass it on to the bank's shareholders without lowering the price by a cent. What has happened since then? The value of the offer, thanks to the fact that it's denominated in shares and our stock has performed well, is now worth 43% more than it was. It was an offer with a 42% premium, and today it's worth 43% more. And it's true that Sabadell's stock has risen since then. But, as I explained before, it has risen significantly, affected precisely by the fact that there is such an attractive offer.