BBVA president told Banco Sabadell counterpart there was 'no room' for higher offer

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The president of Spanish bank BBVA told his counterpart at Banco Sabadell that he had “no room” to improve his 12 billion euro takeover offer, according to a private email that the target of the offer had taken the unusual step of publishing.

“I consider it very important that your board of directors knows that BBVA does not have room to improve its economic conditions,” Carlos Torres wrote in an email sent Sunday to Sabadell president Josep Oliu.

The next day, Sabadell rejected BBVA’s offer, saying it “significantly undervalued” the growth prospects of the lender, which owns major British bank TSB.

Torres’ message came to light on Wednesday, when Sabadell said he decided to publish the email “verbatim.”

The all-stock offering was initially worth 12 billion euros when it was revealed early last week, but its value has plummeted since then, causing BBVA’s share price to plummet.

Torres, who oversaw a previous failed bid for Sabadell in 2020, acknowledged the decline.

“The market also made it clear that there was no further upside potential, as BBVA’s market capitalization fell by more than €6 billion during the period. This situation absolutely prevents us from being able to pay a higher premium than we already offer, because if we did so, it is foreseeable that our value would drop again.

BBVA’s market value now stands at just under 60 billion euros, compared to 74 billion euros for its Spanish rival Santander.

Torres sought to highlight the generosity of BBVA’s offer, saying it had offered a higher premium than initially expected because Sabadell’s shares had recovered between mid-April – when the board of directors of BBVA considered making the proposed offer – and on April 29, the offer was made.

“In our proposal we have already used all the margin we had,” he wrote, saying this represented a 48 percent premium to the value of Sabadell stock in mid-April.

In rejecting BBVA’s offer on Monday, Sabadell said: “The board of directors is very confident in Banco Sabadell’s growth strategy and financial objectives and believes that Banco Sabadell’s standalone strategy will create value superior for its shareholders.”

BBVA declined to comment on Sabadell’s decision to release the email.