Spain’s BBVA sought on Monday to ease concerns about its 12.28 billion euro ($13.15 billion) bid for smaller rival Sabadell by saying it would continue Sabadell’s lending arrangements with its small and medium-sized business clients for at least a year.
The bid, which is opposed by the Spanish government, was rejected by Sabadell’s board, prompting BBVA to launch a hostile offer directly to Sabadell’s shareholders in its latest attempt at a deal, after a failed effort in 2020.
Some of Sabadell’s many small and medium-sized enterprise (SME) customers in its home region of Catalonia have expressed concern that BBVA might not continue to work with them in the event of a deal going through.
However, BBVA Chairman Carlos Torres said on Monday his bank, Spain’s second biggest, was committed to maintaining Sabadell’s SME risk-management model.
“In fact, except in situations of financial deterioration, we will maintain the working capital lines of all small and medium-sized companies for at least twelve months”, he told a financial event in Santander.
Sabadell, Spain’s fourth-biggest bank, is the market leader in SME lending with a share of 12.7%, compared with 11.5% for BBVA.
Last month, Sabadell’s Chief Executive Officer Cesar González-Bueno told Reuters he believed the deal could run into regulatory hurdles over the increased market share in SME lending of a combined entity.
On Monday, Spain’s Economy Minister Carlos Cuerpo also said a more concentrated banking system could have “detrimental effects on clients”, adding that the “hostility” of BBVA’s approach was another element of “concern”.
Under Spanish law, the government cannot stop the takeover bid, but has the final word on allowing a merger.
BBVA has completed all the requests for regulatory authorisation, including to the European Central Bank, Spain’s antitrust watchdog CNMC and banking supervisor CNMV, which has already started to assess the bid.
The bank has offered one newly issued BBVA share for every 4.83 in Sabadell, a premium of 30% to Sabadell’s closing price before the bid was announced, which valued Sabadell at 12.28 billion euros.
BBVA’s shares have since fallen, cutting the premium to about 7.5% and valuing Sabadell at slightly over 10.2 billion euros, according to Reuters’ calculations.
Torres said BBVA’s intention was to pursue a merger but if this was not possible it should still be able to achieve savings in areas such as technology. BBVA would still have influence as a potentially large shareholder in Sabadell.
“Therefore the operation would still be extremely attractive even in that scenario, which is a scenario that we see less likely,” he said.
BBVA has estimated annual cost savings from a merger at about 850 million euros before tax, spread over three years.
BBVA, which had set itself a minimum approval threshold of 50.01% of Sabadell shares, has said that the process could take six to eight months, before formally going to shareholders.
