Banco Sabadell rejects BBVA’s takeover bid

by Lorraine Williamson
Banco Sabadell

It all seemed to happen very quickly. On Tuesday, April 30, there was only talk of a proposal from BBVA to merge with Sabadell. A formal offer followed on Wednesday. But Sabadell’s board of directors rejected the proposal.

BBVA, Spain’s second-largest bank after Santander, proposed one newly issued BBVA share for every 4.83 Sabadell shares, at a 30% premium to the value at which Sabadell was trading on Monday, April 29th.

Decision of the Board of Directors

Banco Sabadell’s board of directors, which had met on Monday to analyse BBVA’s offer, has based its decision on the view that it can create more shareholder value by remaining independent.

“The board of directors believes that the proposal significantly undervalues Banco Sabadell’s project and its growth prospects as an independent entity,” the statement said.

The leadership has “full confidence in Banco Sabadell’s growth strategy and financial targets and believes that Banco Sabadell’s strategy as an independent entity will generate more value for its shareholders”. In addition, the board of directors states in the letter that “the significant decline and volatility in BBVA’s share price in recent days creates additional uncertainty about the value of the proposal”.

“The proposal does not represent the interests of Banco Sabadell”

The board of directors of Banco Sabadell emphasises in the statement that “based on the detailed analysis of the proposal, it is concluded that the offer does not meet the interests of Banco Sabadell and its shareholders. Therefore, it rejected BBVA’s proposal”.

Cogesa Expats

“The board of directors believes that this decision is also in line with the interests of Banco Sabadell’s customers and employees,” the Catalan bank’s management stated.

BBVA’s offer

The merger proposal implied a valuation of Banco Sabadell at around €11 billion, after the price of €9.84 per share at which BBVA’s shares closed during Monday’s trading session. The offer, in turn, implied an increase in the value of the Sabadell share to €2.2, but this share fell and was trading at €1.89 per share, taking into account the 30% premium.

Following this exchange, BBVA was prepared to issue €1,126 billion, an amount representing 20% of the market capitalisation.

According to the Spanish newspaper Europa Press, BBVA’s proposal was to include three members of Banco Sabadell as non-executive directors on BBVA’s board of directors. In addition, one of them would be nominated as Vice-President.

Merger plans failed for a second time

With this decision by the board of directors of Banco Sabadell, the merger between the Catalan bank and BBVA is once again off the table. In 2020, there were also negotiations with this goal, but the operation did not go ahead due to the difference in the valuation of shares between the two banks.

Also read: Spanish Central Bank tightens controls on lending

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