The chair of Banco Sabadell has told the retail shareholders that own nearly half the Spanish bank that it has a “bright” independent future as it attempts to fend off a hostile bid from rival BBVA.
BBVA’s bid for its smaller competitor, which initially valued Sabadell at €12bn, is the biggest takeover battle in European banking for years.
Tension between the banks has been building since BBVA made an all-share bid last month that Sabadell’s board rejected, prompting the larger bank to go hostile and offer the same terms directly to Sabadell shareholders. Spain’s government has already said it opposed the deal.
In a letter seen by the Financial Times, Josep Oliu, Sabadell’s long-standing chair, told retail investors — who own 45 per cent of its shares and include many employees — that BBVA’s rejected offer “significantly undervalued” Sabadell’s “growth prospects as an independent institution”.
As both banks vie to persuade shareholders, a person close to Sabadell said there was “significant execution risk” in the transaction given that Spain’s economy ministry, which must approve any merger, was opposed.
If BBVA’s offer was accepted by at least 50.1 per cent of Sabadell shareholders but the government blocked a merger, BBVA would end up as the majority owner of two banks it was unable to integrate, with limited scope for cost savings, said the person close to Sabadell.
“In this scenario there would be significant adverse affects for shareholders,” they added.
Carlos Cuerpo, Spain’s economy minister, has said the Socialist-led government was against the deal because it would have a negative impact on competition, financial inclusion and regional financial systems in Catalonia and Valencia, Sabadell’s heartlands.
Oliu said in his letter that Sabadell had “bright prospects for the future” and had been the best performer in Spain’s Ibex 35 stock index between the end of 2020 and May 24 this year, although that period includes the boost to its shares from news of BBVA’s bid.
He added that investors did not have to make any decision about BBVA’s offer at this stage and that the bid process was “long” and could stretch into 2025. Sabadell’s board will publish detailed recommendations on the offer at a later date.
BBVA will have to win the approval of a number of regulators, including the European Central Bank, before it can launch its tender offer to shareholders. That is likely to happen towards the end of this year.
If a majority of Sabadell investors opts to sell their shares the deal can go ahead, but the economy ministry must then rule on the proposed merger. BBVA has said this may not happen until 2026.
BBVA said: “If the bid is successful, it means that it has been approved by multiple supervisors and has been widely accepted and supported by hundreds of thousands of investors, mostly Spanish citizens.
“After that process is when the economy ministry will have a say about the merger and we are fully confident that it will appreciate the benefits of the transaction as it will generate a better company for all stakeholders.”
Hostile takeovers are rare in Spain and the lengthy approval process leaves the transaction exposed to the volatility of Spanish politics and any future change in government.
