By Jesús Aguado
MADRID (Reuters) – Spanish bank Sabadell’s board unanimously recommended its shareholders reject BBVA’s hostile takeover bid on Friday, a move that may add pressure on the rival to increase its offer.
BBVA formally launched its 15.3 billion euro ($17.97 billion) bid for Sabadell on Monday as it seeks to create the second-largest Spanish bank in terms of domestic assets worth around 1 trillion euros.
This started the acceptance period, which lasts until October 7 with the results of the offer expected by October 14.
In its statement recommending that shareholders reject the deal, Sabadell’s board said BBVA’s offer “significantly undervalued Sabadell’s business”.
Asked by analysts if the board would change its opinion if BBVA offered a higher price, Sabadell’s Chief Executive Officer Cesar Gonzalez-Bueno said that the board had not established a price or a threshold.
“We just said that with the current traditional methods of valuation the offer is short (by) up to 40%, and we didn’t say anything more than that,” he said.
Mexican David Martinez, the biggest shareholder on Sabadell’s board with a 3.86% holding through Fintech Europe, said BBVA’s takeover was the right strategy but its offer was too low.
While he agreed the offer price should be rejected, he abstained from supporting other parts of the board’s opinion, he said.
“In my opinion, the transaction presented by BBVA is the right strategy for both institutions, although at a price that currently makes it unfeasible,” Martinez said as part of the board’s report.
Some analysts expect BBVA to raise its offer as shares in its smaller rival have surged past the original price, though BBVA has said repeatedly that it does not intend to change its offer.
BBVA can legally raise the offer until 10 working days before the end of the acceptance period.
The premium BBVA offered over Sabadell’s April 29, 2024, closing share price has shrunk from 30% to a negative differential of about 9.24%.
The Spanish government, which opposes the deal, has taken the unusual step of blocking a full merger for at least three years. As a result, Sabadell believes that BBVA’s assumptions on the new cost-saving target of 900 million euros in 2029 rather than 850 million in 2028 are over-optimistic.
Sabadell’s board said it therefore identified a “risk of loss of revenue or dis-synergies, together with the lack of certainty about the execution of the proposed merger”.
Martinez said the measures adopted by the Spanish government will inevitably delay cost savings, and “I hope that the ever-changing political landscape will reconsider the restrictions imposed in the event of a successful transaction.”
He requested that BBVA reconsider and submit a competitive offer at a price that would achieve the acceptance of at least 50% of Banco Sabadell’s shareholders.
If BBVA decided to withdraw this 50% threshold condition, and it reached between 30% and 50% of Sabadell shareholder acceptance, under the Spanish takeover legislation it would be forced to submit another offer with the alternative in cash.
In this regard, Sabadell said that BBVA may be obliged to launch a cash takeover bid at a fair price, in which case BBVA would likely have to increase its capital by issuing a significant number of new shares on the market.
($1 = 0.8516 euros)
(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; Editing by Inti Landauro, Susan Fenton and Joe Bavier)
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