BBVA has 8 billion euros to fund mandatory bid for Sabadell if needed, CEO says

BBVA CEO Onur Genc stated the bank has €8 billion in capital for a mandatory cash offer for Sabadell, should its hostile all-share bid (valued at €17 billion) fail to secure over 50% shareholder acceptance by the October 10 deadline. While Genc's base case is achieving the 50%+ take-up for the all-share offer, he acknowledged the €8 billion would be insufficient if a significantly larger portion of shares required a cash buyout, potentially complicating the formation of what would be one of Europe's largest lenders. This capital provision comes as Sabadell's board continues to deem BBVA's improved offer as undervaluing the company.

Analysis

Asia stocks: Nikkei soars to record high as Takaichi win fuels stimulus bets By Jesús Aguado, Andres Gonzalez and Tommy Reggiori Wilkes MADRID/LONDON (Reuters) -BBVA has 8 billion euros ($9.4 billion) in capital for a mandatory cash offer for Sabadell should it fail to convince enough of its smaller rival’s shareholders to accept its hostile offer, Chief Executive Officer Onur Genc said. In an interview with Reuters on Friday, Genc said his base case was that BBVA would get more than 50% of shares in Sabadell to clinch the all-share 17 billion euro ($19.96 billion) takeover offer. Sabadell’s shareholders have until October 10 to decide. If BBVA secures more than 30% but less than 50% of Sabadell shares, it must make a mandatory offer in cash to remaining investors, or walk away from a deal it has been trying to complete since April 2024. A combined entity would become one of the largest lenders in Europe by assets, with about 1 trillion euros. Should it decide to make a mandatory cash offer, "we don’t need to raise capital in our view", Genc said. Whether BBVA makes such an offer would depend on several factors, including the percentage of shareholders it would need to buy Sabadell out, he said. "If it’s between 30% and 50%, it might, it might not happen. Depends on the take-up, depends on the price, depends on market conditions," Genc said. If BBVA needed to buy out 70% of shares in cash, currently with a market value of 11.7 billion euros, the 8 billion euros would not be enough and it would need alternative sources of finance such as raising capital, something its chairman has ruled out. MOST PROBABLE OUTCOME, ACCORDING TO CITI Citi assigned a 45% probability that the take-up would be in the 30%-to-50% range. BBVA’s CEO said the bank estimated it would end 2025 with a core tier-1 capital ratio of 13.75%, which would imply excess capital of 7 billion euros above its 12% solvency target, without including the suspended 1 billion euro share buy-back. Jefferies analysts believe a cash bid for the remaining capital would be more realistic if the take-up rate approaches 50%. A mandatory offer would be conducted at the same price as the current offer, Genc said, although the fair-value price would be set by the supervisor. Shareholders of Sabadell are widely dispersed and around 40% are retail investors. BBVA’s chances of clinching the deal improved after it increased the bid and David Martinez, Sabadell’s largest individual shareholder, agreed to tender his 3.86% stake although Sabadell’s board reiterated that BBVA’s improved bid undervalued the lender. ($1 = 0.8514 euros) Should you invest $2,000 in BBVA right now? With BBVA making headlines, savvy investors are asking: Is it truly valued fairly? In a market full of overpriced darlings, identifying true value can be challenging. InvestingPro's advanced AI algorithms have analyzed BBVA alongside thousands of other stocks to uncover hidden gems. These undervalued stocks, potentially including BBVA, could offer substantial returns as the market corrects. In 2025 alone, our AI identified several undervalued stocks that later surged by 50% or more. Is BBVA poised for similar growth? Don't miss the opportunity to find out. BBVA is navigating a critical phase in its hostile takeover of Sabadell, having provisioned €8 billion in capital for a potential mandatory cash offer. This contingency plan would be activated if shareholder acceptance for its €17 billion all-share offer falls between 30% and 50% by the October 10 deadline. BBVA's CEO, Onur Genc, maintains that securing over 50% acceptance for the all-share offer is the base case, but the outcome remains uncertain, with Citi analysts assigning a 45% probability to the ambiguous 30-50% range. A significant risk lies in the potential inadequacy of the €8 billion provision; if a mandatory cash buyout for a large portion of remaining shares were required, the cost could exceed this amount, creating a financing challenge, especially as a capital raise has been ruled out. While BBVA projects a strong 2025 CET1 ratio of 13.75%, implying €7 billion in excess capital, the deal's structure is constrained. The bid's prospects are mixed: it gained momentum with the backing of Sabadell's largest shareholder (3.86%), but continues to face public opposition from Sabadell's board, which deems the offer an undervaluation.

Key Decisions for Investors

• Investors should closely monitor the Sabadell shareholder acceptance rate ahead of the October 10 deadline, as a take-up between 30% and 50% introduces significant uncertainty and potential capital strain for BBVA.
• Consider the financial risk to BBVA if a large cash component is required, as the stated €8 billion in capital is insufficient to buy out a majority of remaining shares and management has ruled out raising new equity, creating a potential financing gap under certain outcomes.
• The divergence between Sabadell's board, which rejects the offer, and its largest individual shareholder, who has accepted, signals a contentious path to completion that arbitrageurs and event-driven funds should monitor for shifts in momentum.