BBVA maintains takeover bid for Banco Sabadell despite TSB sale

Banco Bilbao Vizcaya Argentaria (BBVA) announced it will proceed with its voluntary tender offer for 100% of Banco de Sabadell's shares, despite recent shareholder approvals by Sabadell for the TSB Banking Group sale and a €0.50/share extraordinary cash dividend. Under Spanish takeover regulations, these developments could have entitled BBVA to withdraw its bid, but the bank confirmed its decision not to withdraw, maintaining the offer's validity and signaling continued commitment to the acquisition.

Analysis

Banco Bilbao Vizcaya Argentaria (BBVA) has reaffirmed its commitment to the voluntary tender offer for the entire share capital of Banco de Sabadell, signaling strong strategic conviction in the deal. This decision is particularly noteworthy because it comes after Sabadell's shareholders approved measures—namely the sale of its TSB subsidiary to Banco Santander and a contingent extraordinary dividend of 50 euro cents per share—that legally entitled BBVA to withdraw its bid under Spanish takeover regulations (Royal Decree 1066/2007). By formally choosing not to exercise this withdrawal option, BBVA has removed a significant uncertainty surrounding the transaction. This move indicates that BBVA's valuation and synergy calculations for the acquisition remain compelling even without the TSB asset and after accounting for the cash distribution to Sabadell's shareholders. The action solidifies the M&A narrative, shifting the market's focus towards the pending authorization from Spain's securities market regulator (CNMV), which received BBVA's formal request on May 24, 2024.

Key Decisions for Investors

• For Banco de Sabadell shareholders, BBVA's decision to proceed with the offer significantly reduces the deal's break risk, making the tender offer's terms a more certain outcome to evaluate.
• Investors in BBVA should interpret this move as a strong signal of management's confidence in the strategic rationale and synergy potential of the acquisition, even with the approved value leakage from the TSB sale and special dividend.
• The primary focus for event-driven investors should now shift to the timeline and outcome of the regulatory approval process by Spain's securities market regulator (CNMV), which stands as the next major catalyst for the transaction.