BBVA formally launches 14.8 billion euro bid for Sabadell, analysts see room for sweetener

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By Jesús Aguado

MADRID (Reuters) – Spanish bank BBVA formally launched on Monday its 14.8 billion euro ($17.34 billion) hostile takeover bid for Sabadell, with some analysts expecting it will have to raise its offer as shares in its smaller rival have surged past the original price.

The formal launch of the bid comes 16 months after BBVA first went hostile with its offer for Sabadell because that move sparked a lengthy competition review.

Some analysts still expect BBVA to raise its offer as its current bid was almost the same as the one initially announced.

Combining the two lenders would create the second largest Spanish bank in terms of domestic assets worth around 1 trillion euros, behind Caixabank. However, the Spanish government, which opposes the deal, has taken the unusual step of blocking a full merger for at least three years.

Sabadell shareholders now have until October 7 to tender their shares, according to the expected calendar, with the results of the offer expected by October 14.

Shares in Sabadell have outperformed BBVA’s since April 2024 and risen above the bigger rival’s original offer. BBVA on Friday said that the bank was not planning to change the offer.

It can legally raise the offer until five days before the end of the acceptance period, though.

The premium BBVA offered over Sabadell’s April 29 2024 closing share price has shrunk from 30% to a negative differential of around 9%.

“Retail investors in particular are unlikely to view an offer below market price as attractive,” Barclays analysts said in a note on Monday.

However, they said that by sticking to the original terms BBVA had preserved the financial appeal of the deal, which will boost its presence in Spain.

Shares in BBVA and Sabadell were up around 0.6% by 1221 GMT, as the market will wait to see if BBVA sweetens its bid in coming weeks.

Spanish broker JB Capital said that it believed BBVA “will need to top up the bid if it wants to reach the targeted 50.01% acceptance” and that BBVA could increase the bid by up to 34% while maintaining 85% of the new 900 million euros synergies that the bank is targeting.

Exane BNP Paribas said that under the current terms it would be “quite difficult” for BBVA to convince Sabadell’s shareholders, especially the relatively large number of retail shareholders which account for about half of the shares.

Shareholders of Sabadell are widely dispersed. Its 20 largest shareholders are international institutional investors, with its biggest shareholder BlackRock owning around 7%, according to the Spanish supervisor.

Jefferies said BBVA could still improve the terms of the deal, somewhat discounted in share prices to the tune of an extra 1.5 billion euros.

BBVA says it is aiming to secure 50.01% of Sabadell shareholder support, but it recently got authorisation from regulators in the U.S., where the bank’s shares also trade, to lower the threshold to 30%.

Spanish broker Alantra however said that with delayed synergies, BBVA cannot afford a large premium to convince retail investors as BBVA seemed to be chasing control of just over 30% of Sabadell.

($1 = 0.8537 euros)

(Reporting by Jesús Aguado, Editing by Inti Landauro, Tommy Reggiori Wilkes and Susan Fenton)