BBVA has freely available reserves of 5,478 million euros which, in the event of a takeover bid for Sabadell, would constitute the capital most readily available to start structuring a purchase operation, market sources indicate. It would be, so to speak, the dry powder – in the investment world they use the expression dry powder – with which to arm a hypothetical hostile offer after the insolence suffered yesterday.
After Sabadell’s head-on 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 atomization of Sabadell’s capital, without a hard core of shareholders, but would require an additional effort and cash from BBVA.
The bank chaired by Carlos Torres increased its balances by nearly 1.5 billion euros last year, thanks to the record results obtained amid interest rate hikes. 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 expects to generate between 2024 and 2025. The president of BBVA was referring to reality to the entity’s solvency ratio, in which good quality capital equals 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 is to deteriorate this ratio below 12% is anathema in the banking sector, so BBVA would not force this way. In the Sabadell proposal, the bank had already been very careful in indicating that it would barely 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, he sold the business in the United States for 9.7 billion euros and tackled a first merger attempt with the Catalan bank, which was experiencing problems, especially in its British subsidiary TSB. Having failed in that attempt, BBVA obtained 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 particularly suitable for balancing the business.
In the proposed share exchange, BBVA valued the Sabadell share at 2.25 euros, which gives a total of 12,200 million over the bank as a whole. However, the proposal was in shares and barely gave Sabadell 16% of the capital of the resulting group.
Sabadell is in an excellent moment on the stock market and on an upward trajectory. TSB is now clean and it is reasonable that its current managers want to continue to develop the project.
The analysts cited by Bloomberg assign a value of 1.93 euros to the Sabadell share, above the 1.89 euros at which they closed yesterday. Despite the movements, these days Sabadell’s and BBVA’s quotes have not come close to the proposed change, which suggests that the market had doubts about its success and even about the possibility of an opahostil.
