Sabadell ‘in talks about all-share offer’ from larger bank BBVA

Madrid — Sabadell’s board was meeting on Monday to discuss an all-share offer from larger Spanish bank BBVA that was worth about€12bn ($12.9bn) when announced last week, two sources familiar with the matter said.

BBVA said on May 1 it had proposed offering one newly issued share for every 4.83 Sabadell shares, a premium of 30% over the smaller bank’s April 29 closing price, to create one of the biggest lenders in the eurozone by market value.

The two Spanish banks called off previous merger talks in November 2020 as they could not agree on terms.

Sabadell, which said its board would assess the offer and lined up investment banking advisers Morgan Stanley and Goldman Sachs to assess its options, declined to comment on Monday on the meeting or its possible outcome.

The board could decide to formally enter into talks with BBVA, demand better terms or reject the proposal. One of the sources said a decision by Sabadell’s board could come as early as on Monday but the board could also take longer to reach a decision.

The proposed deal would give Sabadell shareholders a 16% stake in the combined group and based on the May 3 closing prices of €9.850 for BBVA and €1.8850 for Sabadell, would be worth about €11bn with the shares remaining well below the premium price.

“The market is not taking for granted that the proposed deal will go ahead and that’s why we see a gap between the offer and current share price of Sabadell,” Nuria Alvarez, an analyst at Madrid-based broker Renta 4, said.

At 11.30am GMT, Sabadell shares were up 0.34% at €1.8915, while BBVA shares were down 0.6% at €9.79.

Under BBVA’s offer, three members of Sabadell’s board of directors would join BBVA’s board as nonexecutive directors, with one acting as one of the vice-chairs of BBVA’s board.

Sabadell’s biggest shareholders are mainly institutional investors, such as BlackRock with a 3.6% stake, Fintech Europe, with a 3.10% stake, Dimensional Fund Advisors, with a 3.01% holding, but also Mexican independent nonexecutive board member David Martinez Guzman, with 3.49%.

Domestic mergers generate cost savings

A merger of Spain’s second- and fourth-largest banks would create a lender with over €1-trillion in total assets and would be the latest consolidation in the country’s banking sector.

Banks favour deals at a national level as cost savings are easier to achieve. BBVA has said a merger with Sabadell would generate cost savings of about €850m.

On Monday, Bank of Spain governor Pablo Hernandez de Cos said cross-border bank mergers in the EU won’t take off until the bloc completes its European banking union first.

“If the past is a predictor of the future I would not be very optimistic (about cross-border deals) but hopefully that will change at some point,” De Cos told a financial event.

The potential merger would allow BBVA to diversify away from Mexico, its main market, and developing economies such as South America and Turkey, and focus on its domestic market as banks try to raise revenue by scaling up their business as a boost from high interest rates fades.

Reuters