Banco Sabadell, a Spanish lender, has rejected BBVA’s €12bn bid for its takeover. The proposed deal is “significantly below” the value of its own growth prospects.
Last week BBVA made a surprise bid for Sabadell. They said the merger of two Spanish lenders will create “one the largest and most robust financial entity in Europe”.
The rejection forces BBVA to decide whether it will take the more risky path of launching a hostile offer in a country that is not used to such deals.
It’s BBVA’s second attempt at acquiring Sabadell in under four years. The most recent bid sent the share price of the would-be purchaser lower before the smaller bank’s board formally rejected this all-stock offer Monday.
Sabadell’s board, which also owns UK high-street bank TSB said that it “believes the proposal substantially undervalues Banco Sabadell’s potential and its standalone growth opportunities”.
The board added: “The Board is confident in Banco Sabadell’s growth strategy and financial targets, and believes that Banco Sabadell’s standalone strategy will generate superior value for its investors.”
BBVA’s response was: “We regret the decision of Banco Sabadell to reject such an attractive proposal.”
The Spanish banking sector has long been urged to consolidate its banks by regulators and bankers alike.
BBVA said last week that a Sabadell takeover would create a combined company with complementary customer bases, and the size necessary to deal with future interest rates cuts and the accelerating digitisation in finance.
Some analysts questioned the potential financial gains of the proposed deal.
When BBVA announced its bid, it had a capitalisation just below €60bn. Since then this has dropped to €57.5bn.
Sabadell stated in its statement that the “recent material decline and volatility of the BBVA Share Price increases the uncertainty surrounding the value of this proposal”.
BBVA announced that it would offer a premium of 30% for Sabadell based upon the closing share price on Monday, and a 50% premium over the weighted average price in recent three months.
In 2020, during the Covid-19 pandemic of 2019, both banks tried to reach a deal. However, talks fell apart due to disagreements on pricing.
Goldman Sachs is advising Sabadell. Morgan Stanley is advising Sabadell. People briefed about the matter said that UBS and JPMorgan advise BBVA regarding its bid.