BBVA’s Bid to Acquire Banco Sabadell Hits Road Block

Banco Bilbao Vizcaya Argentaria’s (BBVA) proposal to acquire Banco Sabadell for $17.4 billion in Spain hit a road block after the latter rejected the offer despite BBVA securing clearance from the country’s regulator National Securities Market Commission of (NSMC) last week on the ground that its terms complied with applicable regulations and the prospectus’s contents were sufficient following recent amendments.

Banco Sabadell Chairman Josep Oliu said that this offer significantly undervalues Sabadell and its future prospects, and is even less attractive than the initial BBVA bid rejected by the Board in 2024. According to him, Banco Sabadell has appreciated more in value and delivered higher returns to its shareholders than BBVA over the past 16 months, while the proposal remains one BBVA share plus $o.82 in cash for every 5.5483 Banco Sabadell shares.

“In this regard, Banco Sabadell is the best performing European bank with the best stock market performance over the past five years and has an excellent outlook for shareholder remuneration. Taking 6 May 2024 as a reference point, Banco Sabadell’s shares have appreciated by 108% and BBVA’s by 55%,” Oliu said.

Banco Sabadell CEO Cesar Gonzalez-Bueno said that in their preliminary review, they found even more shortcomings and omissions in the modelling and assumptions than in the previous version. Notably, the option for BBVA to acquire less than 50% of Sabadell’s shares reflects a clear lack of conviction in their own proposal, and doubts over the attractiveness of their offer, he said.

“It seems like an inadequate offer based on unrealistic assumptions, but we will need to analyse it in detail before giving a full assessment,” Cesar said.

In any case, Oliu reiterated that it is important for Banco Sabadell’s shareholders to know that if they accept BBVA’s latest offer, they lose more than 8% of their investment, give up the extraordinary dividend of $0.59 that will be paid in early 2026 when the sale of TSB Banking Group (a subsidiary of Banco Sabadell in the UK) is completed, and they have to pay taxes on the capital gains from the exchange of the shares, and in the vast majority of cases they will receive less cash than they will have to pay to the Treasury.

Profits Expected

Banco Sabadell has full confidence in the attractiveness of its standalone project based on the new 2025–2027 Strategic Plan, under which it expects to exceed $1.88 billion in profits in 2027 and raise its ROTE to 16% after deconsolidating its UK subsidiary TSB.

“To achieve this, the bank aims to increase commercial activity in Spain at a pace above the market in most business segments; grow its loan portfolio by 5% annually; improve its risk profile; boost revenues; and maintain efficient cost management,” Oliu said.

The Board of Directors will conduct a comprehensive analysis of the offer in the coming days of what is most beneficial to shareholders. A formal recommendation will be communicated to shareholders once that is complete. In the meantime, the Board recommends shareholders take no action, he added.