SPANISH bank BBVA has launched a hostile takeover bid for Banco Sabadell after its merger bid was rejected.
BBVA will now attempt to bypass Sabadell’s board and woo its shareholders directly after the Catalan bank’s board decided against the €12.2 billion deal from it’s Basque rivals on Monday.
Sabadell’s ownership structure is divided between institutional investors (52%) and retail investors (48%), and BBVA will have to convince at least 50% of them to take up their offer.
The hostile takeover bid remains unchanged from the one previously rejected by Sabadell’s board, with BBVA proposing an exchange ratio of one BBVA share for every 4.83 Sabadell shares.
The Spanish government, which has signalled its disapproval of BBVA’s hostile approach, will provide another obstacle to overcome.
Economy Minister Carlos Cuerpo pointed out the government has the ‘final say’ on the matter and the merger must undergo the necessary regulatory approvals.
However BBVA have cited the potential benefits of the merger.
They include increased profitability, cost savings of around €850 million annually, and a stronger position to compete with the big boys in the European market.
They also estimate an earnings per share increase of 3.5% and a return on investment of close to 20% by 2026.
BBVA plans to submit the prospectus outlining the offer details and the request for authorization to the Spanish Securities and Exchange Commission (CNMV) within the one-month deadline.
The bid will have to jump through hoops put up by various regulatory bodies, both in Spain and abroad.
The Spanish National Competition Commission (CNMC), the UK’s Prudential Regulation Authority (due to Sabadell’s UK subsidiary TSB), and the BBVA’s board, who will have to approve of a capital increase to generate the new shares for the exchange, will all have a say.
The bank estimates the closing of the transaction to take between six and eight months, with the technological integration between the two entities taking an additional 12 to 18 months.
