Banco Sabadell has once again rejected a merger proposal with BBVA. The second in less than four years. Yesterday the bank’s board of directors, in an extraordinary meeting held in Madrid, rejected the purchase offer that BBVA had sent it last week by means of a letter. The decision of the bank’s governing body – advanced by La Vanguardia – is based on the fact that “Banco Sabadell’s strategy as an independent entity will generate greater value for its shareholders” than if it were integrated into the entity chaired by Carlos Torres, according to the statement sent to the CNMV.
BBVA’s reply, very brief, arrived after a few minutes: “We regret that the board of Banco Sabadell has rejected such an attractive offer”.
In 2020, the entity chaired by Josep Oliu gave BBVA a pumpkin after a couple of weeks of negotiations, although they did not agree on the price or governance. On this occasion there were no talks (at least formal) and the council’s refusal took place in less than a week. “The proposal significantly undervalues ??Banco Sabadell’s project and its prospects for growth as an independent entity”, specified Sabadell in its statement. The bank’s governing body added that “the significant drop and volatility in BBVA’s share price in recent days generates additional uncertainty about the value of the proposal”. BBVA shares have fallen by almost 10%. According to the council of Sabadell, the rejection of the proposal is “aligned with the interest of the clients and workers” of the entity.
From now on, it’s up to him to move on to BBVA. It could withdraw, submit a new significantly improved offer, or launch a hostile takeover bid. The truth is that in Spain there have hardly been bank purchase operations that were not negotiated. And in this process that began last Tuesday, BBVA has always defended that its intention is to carry out an agreed operation in a friendly manner.
Sabadell will also have to explain to the market why its proposal alone is better than the one proposed by BBVA. Yesterday he gave some clues in the statement to the CNMV: “The board reiterates its commitment to distribute to the shareholders, on a recurring basis, any excess capital above 13%”. And he specified that the money that could be distributed to shareholders in the years 2024 and 2025 is about 2,400 million if the dividends and the aforementioned excess capital are counted.
Since BBVA’s interest in Sabadell was made public, the shares of this entity have risen by 8.6%, and those of the Bilbao-based bank have fallen by 9.7%. Yesterday, after Sabadell’s rejection was made public, BBVA’s shares rose 3% on the New York Stock Exchange, which suggests that they may also rise on the Spanish stock market today. It is possible that in the case of Sabadell the opposite effect will occur and the quotation will adjust downward, since the rebound of the last few days is due to the fact that some investors tried to “capture” the premium offered by BBVA to the shareholders if the merger had finally gone ahead.
Unlike what happened in 2020, this time there has been criticism of the operation by the Generalitat, employers and unions. The operation was viewed with reluctance by the Government because it meant the disappearance of an entity with operational headquarters in Catalonia. Sabadell has its headquarters in Sant Cugat del Vallès, although its registered office has been in Alicante since the crisis of the 2017 referendum. Yesterday the Minister of Economy, Natàlia Mas, called it a “good decision” the path taken by Sabadell. The business sector supported the decision and the unions breathed a sigh of relief that they did not have to face an employment adjustment.
In November 2020, the operation did not succeed because the entity chaired by Josep Oliu considered BBVA’s offer very low, which was speculated to be close to 2.5 billion euros. Today, the capitalization of Banco Sabadell multiplies that number by four.
The Sabadell share has been revalued by 350% since the failed merger that took place in 2020 precisely because of the plan that the entity put in place to be able to remain independent. Sabadell changed its CEO, Jaume Guardiola, to César González-Bueno, who currently manages the entity. At the same time, Oliu left the executive functions. The new team cleaned up the British subsidiary TSB. Although the initial plan was to sell it, now the situation is radically opposite and it is considered one of Banco Sabadell’s main assets.
This time, the proposed merger by absorption proposed by BBVA valued Sabadell at almost 11.5 billion euros. If we take as a reference the stock market quote on Monday of last week, before BBVA’s intentions were known, the premium was 30%. The exchange equation was one new BBVA share for every 4.83 Sabadell shares. Apart from the financial offer, BBVA offered Sabadell three positions on the board of directors and a vice-presidency.
