BBVA has freely available reserves of 5,478 million euros which, in the event of launching a takeover bid for Sabadell, would constitute the most readily available capital to begin articulating a purchase operation, market sources indicate. It would be, so to speak, dry powder – in the investment world they use the expression dry powder – with which to put together a hypothetical hostile offer after the rudeness suffered yesterday.
After Sabadell’s frontal rejection, BBVA sees its options limited, now reduced to proposing a much improved agreement or launching a hostile takeover bid. This second option has in its favor the atomized nature of Sabadell’s capital, without a hard core of shareholders, but it would require an additional effort and cash from BBVA.
The bank chaired by Carlos Torres increased its remainders by almost 1,500 million euros last year, thanks to the record results obtained between increases in interest rates. They are added to those accumulated in previous years.
At the beginning of the year, Torres already estimated BBVA’s excess capital at 2.5 billion euros, a figure similar in reality to the 2.4 billion that Sabadell plans to generate between 2024 and 2025. The president of BBVA was actually referring to the entity’s solvency ratio, in which good quality capital is equivalent to 12.67% of assets. The ECB requires 8.75% and the margin with respect to this requirement is 14,260 million euros. However, anything that would deteriorate this ratio below 12% is anathema in the banking sector, so BBVA would not force this path. In the proposal to Sabadell, the bank had already been very careful in indicating that it would only reduce the ratio by 0.3 points.
The experts consulted assume that, to launch a takeover bid for Sabadell, BBVA would have to resort to bond issues and financing formulas. A capital increase would be completely ruled out, due to the penalizing effect of appealing to the shareholders themselves.
The bank understands that, in the absence of cross-border mergers in Europe, Sabadell is its best fit. In 2020, it sold the business in the United States for 9.7 billion euros and undertook a first merger attempt with the Catalan bank, which was going through problems, especially around its British subsidiary TSB. When that attempt failed, BBVA took over the first bank in Turkey, which, added to its position in Mexico, has only increased its dependence on emerging countries. Sabadell’s British subsidiary would now give it a base in the United Kingdom that is especially appropriate to balance the business.
In the proposed share exchange, BBVA valued Sabadell’s share at 2.25 euros, which gives a total of 12.2 billion for the bank as a whole. However, the proposal was in shares and only gave Sabadell 16% of the capital of the resulting group in exchange.
Sabadell is in an excellent moment on the stock market and is on the rise. TSB is now healthy and it is reasonable that its current managers want to continue developing the project.
The analysts cited by Bloomberg assign the Sabadell share a value of 1.93 euros, above the 1.89 euros at which it closed yesterday. Despite the movements, these days the prices of Sabadell and BBVA have not approached the proposed exchange, which suggests that the market had doubts about its success and even about the possibility of a hostile takeover.
