Bank war in Spain: BBVA launches a hostile takeover of Sabadell

Spanish bank BBVA’s friendly takeover bid for rival Sabadell is becoming hostile. And political, since the Spanish government is involved. On Thursday, three days after rejecting the friendly merger offer, BBVA, Spain’s second-largest bank in terms of market capitalization (€60 billion) and number of customers (74.1 million), announced the launch of a hostile takeover bid for Spain’s fourth-largest bank (€9.8 billion capitalization, 20 million customers).

Nearly four years after an initial failed merger attempt, the deal, if successful, would create a European banking giant capable of competing with Santander, Spain’s leading bank with a market capitalization of 72 billion euros and 166 million customers, as well as other European giants such as HSBC and BNP Paribas.

Sabadell valued at 11.5 billion euros

In other words, the takeover offer is being made on the same terms as the marriage proposal that Sabadell’s Board of Directors rejected, which call for exchanging 4.83 Sabadell shares for one new BBVA share, making Sabadell valued at close to 11.5 billion euros.

Sabadell’s management body has determined that the offer is insufficient, despite BBVA Chairman Carlos Torres calling it “extraordinarily attractive, capable of creating a larger entity.” They believe that the marriage would be against the interests of Sabadell’s customers, employees, and “its shareholders,” who would only hold a 16 percent stake in the new entity.

The offer is thus in the hands of Sabadell’s own shareholders. The Catalan bank has no controlling shareholder but a multitude of shareholders with no more than a 4 percent stake, including large investment funds. In any case, the takeover bid was well received on the Madrid Stock Exchange as far as Sabadell is concerned, whose stock gained 3.47 percent as of 09:50 GMT. BBVA’s shares, on the other hand, were down 5.95 percent.

But not by Spain’s leftist government, which immediately committed itself to the issue. The executive’s number three, Yolanda Diaz, Minister of Labor and leader of the far-left platform Sumar, spoke out against the bid, which she deemed “contrary to the interests” of Spain, as it would “destroy many jobs,” strengthen the banking “oligopoly,” and “kill Sabadell for the exclusive benefit of the foreign investment funds that own BBVA.”

For his part, Economy Minister Carlos Cuerpo warned that the government will have “the final say when it comes to authorizing the deal,” which he “rejects in both form and substance,” without providing specific details on the executive’s leeway in blocking the deal.

Employee unions are concerned not only about jobs but also about the services offered to customers in a market concentrated around a handful of groups. This takeover bid “could be the first of a new phase of mergers, motivated by exuberant profits, which would exacerbate the problems of competition” and “financial exclusion,” the Commission ouvrières union said in a press release.

As a reminder, the Spanish banking sector has undergone significant consolidation since the 2008 financial crisis, marked by the virtual disappearance of regional savings banks. As a result, tens of thousands of jobs were lost. At the same time, the Spanish government, even the socialist government, rarely had the strength to oppose the