Spain’s BBVA launches rare hostile takeover bid for rival Sabadell

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A logo in front of the Banco Sabadell SA offices in the Banc Sabadell Tower in Barcelona, ​​Spain, on Wednesday, May 1, 2024.

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Spanish bank BBVA surprised markets on Thursday after announcing a rare hostile takeover bid for domestic rival Banco Sabadell. One investment firm described the situation as “very strange.”

The move comes shortly after a separate takeover offer from BBVA to Sabadell's board worth 12 billion euros ($12.87 billion) was rejected earlier this week.

The board said on Monday that BBVA's initial offer “significantly undervalues” the bank's growth prospects, adding that its standalone strategy would create greater value. It reiterated that position on Thursday when BBVA made its share offering directly to the bank's shareholders.

BBVA said its takeover offer had the same financial terms as the merger offered to Sabadell's board. She described the proposal, which if successful would create Spain's second largest financial institution, as “extremely attractive”.

“We are making an extremely attractive offer to Banco Sabadell shareholders to create a bank with greater reach in one of our most important markets,” BBVA Chairman Carlos Torres Vila said in a statement.

“Together we will have a greater positive impact in the regions where we operate, with an additional lending capacity of €5 billion per year in Spain.”

Shares in BBVA fell 6% around midday London time on Thursday, while Sabadell's share price rose more than 3%.

'Not so easy'

Hostile takeover bids are not common in the European banking sector and BBVA's decision to proceed in this manner has surprised many.

Carlo Messina, CEO of Italy's largest bank Intesa Sanpaolo, told CNBC on Wednesday that there are significant challenges to domestic consolidation in the region's banking sector.

He said it was difficult to complete a “friendly transaction” in the current market environment, while executing a hostile takeover bid was also “not that easy”.

David Benamou, chief investment officer at Axiom, said BBVA's offer for Sabadell reflected “a very strange situation indeed.”

Speaking to CNBC's “Squawk Box Europe” on Thursday, Benamou said the proposed offer “makes sense” from the perspective of Sabadell shareholders and that he believes it is likely to be accepted. He pointed out that BBVA's offer represented a 30% premium over both banks' April 29 closing price.

“It reflects the recent discussions in Switzerland about the consolidation of Credit Suisse by UBS and all the concerns about financial stability,” he added.

“I think executing the transaction could be quite difficult, although one can argue that it is the same geographical location, the culture is theoretically very similar, unlike a cross-border merger.”

Benamou said a burgeoning consolidation trend among European banks was logical, particularly because many regional lenders are “very small” compared to their U.S. rivals.

Signage in front of a Banco Bilbao Vizcaya Argentaria SA (BBVA), right, and a Banco Sabadell SA, left, bank branch in Barcelona, ​​Spain, on Wednesday, May 1, 2024.

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Spain's Economy Ministry said in a statement that the government rejected BBVA's hostile takeover bid for Sabadell “both in form and in substance.”

The ministry also warned that the proposed agreement “involves potential harmful effects on the Spanish financial system.”