Sabadell's takeover bid puts Competition in the spotlight

MadridIt has been almost five months since the National Commission of Markets and Competition (CNMC) launched phase 2 of the analysis of BBVA's takeover bid for Banc Sabadell And, as the days pass, the agency chaired by Cani Fernández has ended up in the spotlight. Its role in the operation has become a thorn in its side, especially now that one of the parties, specifically Banco Sabadell, hasn't ruled out the verdict being made public after the summer, according to sources close to the operation, which would throw BBVA's timeline into disarray.

The Competition Authority has just launched a new market test (asking for opinions from various parties it considers involved in the takeover bid) taking into account the latest commitments presented by BBVA. However, according to the same sources, the Bilbao-based entity has proposed commitments whose impact is "minimal," particularly in the case of SMEs, where the Competition Authority has doubts. These commitments "would only protect the credit volume of 5% of the SMEs that Sabadell currently serves," the same sources indicate. In other words: in terms of protection based on business volume, it would be 1%.

In the commitments BBVA has submitted to the CNMC, the bank proposes maintaining the working capital lines for all Sabadell SMEs, regardless of the entities they work with, for five years. However, it does so with a specific commitment for those SMEs that only operate with Sabadell and BBVA, to which it commits to maintaining the total credit volume.

What are the next steps?

In the new market test initiated by the CNMC, the parties involved who have been asked for their opinions have ten days to respond. These parties are BBVA and Sabadell, as well as around twenty companies in the financial sector. who see the operation as a business opportunity. It has also asked for their opinion from a dozen economic organizations, such as Pimec. Contrary to what ARA initially suggested, employers' organizations such as Foment del Treball have been left out. In fact, this and other organizations already filed an appeal with the National Court when the CNMC excluded them from Phase 2. In total, the CNMC excluded 79 interested parties.

Once this market test is completed, the Competition Directorate must decide whether it needs more information from the parties or not. The clock, therefore, can be stopped again. But if not, it will submit the report to the chamber, which must debate it and may either revise it or approve it directly. The final verdict will reach the Ministry of Economy, and a Phase 3 could open: the Council of Ministers has its say, which the market takes for granted.

Unprecedented Commitments

What the Competition Authority says about the transaction is important because it will determine what commitments (or conditions imposed by the CNMC itself) BBVA will have to assume if the takeover bid for Sabadell is successful. So far, BBVA has gone to great lengths to convince the Competition Authority of the merits of the transaction and has asserted that the commitments it assumes are "unprecedented."

Meanwhile, the same sources reiterate that as time goes by, the offer is becoming "less attractive" to Sabadell shareholders, both due to the performance of Sabadell's stock market share and the dividend payment. In fact, according to these sources, BBVA should increase its offer by up to 25% if it wants to reflect Sabadell's book value, not including the additional increase due to the acquisition premium.