Spain's BBVA announces $13 billion hostile takeover bid for Sabadell

The headquarters of the Spanish bank BBVA is in Madrid, Spain.

Juan Medina | Reuters

Spanish bank BBVA presented a 12.23 billion euro takeover offer for its rival Sabadell directly to shareholders on Thursday, even though Sabadell’s board of directors already this week rejected the proposal under the same conditions.

BBVA’s decision follows Sabadell’s board of directors saying on Monday that the unsolicited offer significantly undervalued the bank’s growth potential and prospects. The board reiterated that position Thursday.

“We are presenting Banco Sabadell shareholders with an extraordinarily attractive offer to create a larger bank in one of our most important markets,” said Carlos Torres Vila, executive chairman of BBVA.

Hostile takeover bids are rare in the European banking sector. A recent example is the successful takeover of UBI Banca by Intesa in 2020.

BBVA, the second largest Spanish bank in terms of market value after Santander, proposed an exchange ratio of 1 newly issued BBVA share for 4.83 Sabadell shares, representing a 30% premium to the April 29 closing prices.

Spanish banks are looking for ways to increase revenue as the impact of high interest rates begins to fade.

Buying Sabadell would allow BBVA to diversify from Mexico, its main market, and other developing economies such as Turkey and South America, and focus on its domestic market.

BBVA Managing Director Onur Genc said: “all stakeholders will benefit from this operation.”

“Banco Sabadell has done an excellent job, with remarkable progress in recent years, and now its shareholders can join an entity offering an unprecedented combination of growth and profitability in Europe,” Genc said.

The deal, which BBVA said could generate pre-tax cost savings of €850 million, would give Sabadell shareholders a 16% stake in the combined lender.

BBVA aims to create a lender with more than 100 million customers worldwide and assets exceeding 1 trillion euros, second only to Santander among Spanish banks.

The combined entity would also overtake Caixabank as Spain’s largest national lender, with more than €625 billion in assets in the country, compared to just over €574 billion for Caixabank.

Spain’s banking sector has undergone a period of consolidation as lenders seek to cut costs and increase size. Spain now has 10 banks, compared to 55 before the start of the 2008 global financial crisis.

BBVA and Sabadell called off merger negotiations in November 2020 because they did not agree on terms, including price.