(Bloomberg Opinion) -- Banco Bilbao Vizcaya Argentaria SA has gone hostile in its pursuit of smaller Spanish rival Banco de Sabadell SA in a highly unusual move both for banking deals and the Spanish market. In truth, this looks like a face-saving admission of defeat more than a winning move.
BBVA is taking a big risk for a somewhat underwhelming reward: Going hostile means it won’t even get a proper look at its rival’s books before any deal, while the gain from success is a measly 3.5% addition to earnings per share when cost savings are achieved after three years by BBVA’s own estimates.
The bigger bank’s shareholders are unimpressed, sending the stock down 6% in early trade Thursday to its lowest level since news of a bid emerged last week. BBVA’s chances look poor.
This is the first hostile bid in banking Spain since the 1980s, according to Bloomberg News. I don’t think there has been one of any size in Europe or the US since the late 1990s when Britain’s Royal Bank of Scotland Plc was pursuing its aggressiveexpansion. They are rare in banking and insurance because a target’s financial liabilities can hide all manner of nasty surprises.
BBVA’s timing is strange, politically: Sabadell originally hails from a small city near Barcelona in the heart of Catalonia, where it is still a major employer, while BBVA is a giant of Madrid. Catalans are going to the polls in a regional election Sunday that is being seen as an unwelcome and unexpected test for the national government and embattled Prime Minister Pedro Sanchez. It was almost inevitable that the government would frown – and it did with a spokesman swiftly denouncing BBVA’s hostile takeover attempt.
The question then is why do it? Talks between the two banks hit a wall almost immediately. Sabadell’s board rejected BBVA’s first all-share offer, then this week published an email in which BBVA Chairman Carlos Torres Vila said there was no room to improve the bid, which would give Sabadell shareholders one BBVA share for every 4.83 of their own.
Sabadell’s response was that it wouldn’t negotiate and BBVA could either make a new public offer or go away.
The slender expected gains from the deal for BBVA and the slide in its share price show why there’s no wiggle room. BBVA could have taken some of the uncertainty out of the value of its offer by swapping some of the shares for a cash portion, but that might not have made any difference to Sabadell’s board.
Sabadell’s view is that the bid significantly undervalues what it can achieve for shareholders itself over coming years. The bank has been going through a long recovery and it still restructuring its UK arm, TSB, which announced another round of job cuts and branch closures on Wednesday.
Analysts are starting to buy Sabadell’s story: Consensus earnings per shares estimates have risen 6% for 2024 and 10% for 2025 since the bank’s first-quarter earnings in late April. But estimates for its return on tangible equity still fall some way short of the bank’s target of more than 12%.
BBVA’s offer does represent a good premium to where Sabadell’s shares have traded — it was 30% on the day before the deal news broke and a simple average of more than 50% over the prior three months. At Thursday’s prices, it was about 8%. I’ve argued the deal is the best Sabadell shareholders are likely to get.
BBVA’s decision to go hostile might be just an indirect admission of defeat. Chief Executive Officer Onur Genc told investors on a call on Thursday that if the deal didn’t happen BBVA would just move on. He pointed to recent market-share gains in Spanish retail banking and corporate lending. He also said BBVA had got some positive feedback on its offer from Sabadell shareholders, including some that are quite important in its register. That doesn’t sound like a slam dunk.
The problem for both sets of investors is they now have to wait up to six months before any offer can be tested. BBVA needs to submit the deal for approval at the European Central Bank and to Spanish securities and competition regulators, either of whom might scupper the deal.
BBVA investors will get a chance to vote first on whether to allow the bank to issue the stock needed for the deal. Then perhaps by the final months of the year, Sabadell shareholders will vote on whether to accept: BBVA will take a simple majority of 50.1% as approval.
All this drawn-out uncertainty is no good for either bank. BBVA’s hostile move might just upset everyone and the bank could ultimately regret its determination to try to force a vote. Rather than stamp its feet in annoyance, it might have been better for BBVA to just walk away after all.
More From Bloomberg Opinion:
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. Previously, he was a reporter for the Wall Street Journal and the Financial Times.
More stories like this are available on bloomberg.com/opinion
©2025 Bloomberg L.P.
Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.