Spain's market supervisor authorises bank BBVA's higher offer for Sabadell

Spain's stock market supervisor has authorized BBVA's improved 17 billion euro ($20 billion) bid for smaller rival Sabadell, offering 3.39 euros per share, a 10% increase from the prior offer. Shareholders now have until October 10 to tender their shares. Despite the improved terms, Sabadell's CEO has indicated the board will likely not recommend the offer, suggesting continued resistance to the hostile takeover attempt.

Analysis

Spain's stock market supervisor has formally authorized BBVA's revised hostile takeover bid for Sabadell, a critical step that moves the decision directly to shareholders. The improved offer, now valued at approximately 17 billion euros, represents a 10% increase from the prior proposal, equating to an exchange ratio of one BBVA share for every 4.8376 Sabadell shares. Despite this enhancement, Sabadell's management remains resistant, with CEO Cesar Gonzalez Bueno publicly stating the board will 'probably' not recommend the new price, deeming it 'insufficient'. This sets the stage for a contentious shareholder acceptance period, which now extends to October 10. Market dynamics since the revised offer have caused Sabadell's stock to underperform BBVA's, which has paradoxically increased the effective premium for Sabadell shareholders from an initial 1.6% to 2.89% as of Wednesday's close, a factor that may slightly influence their decision to tender shares.

Key Decisions for Investors

• For investors in BBVA, the regulatory authorization is a positive procedural step, but the deal's success remains contingent on winning over Sabadell shareholders with what is still a modest premium and against explicit board opposition.
• Sabadell shareholders must weigh the decision to tender their shares to capture the current 2.89% premium against holding their position in anticipation of a potentially higher bid from BBVA or the risk of the deal collapsing entirely.
• Event-driven and arbitrage-focused investors should note that the low implied premium reflects significant market skepticism about the deal closing at the current terms, indicating that the primary variable is whether BBVA will sweeten its offer again to secure shareholder approval.