Spain's BBVA tweaks bid for Sabadell following dividend payment

BBVA has adjusted its hostile takeover bid for Sabadell, now valued at around 15.5 billion euros, to maintain its value following Sabadell's interim dividend payment. The revised offer proposes one new BBVA share and 0.70 euros in cash for every 5.5483 Sabadell shares, an adjustment from the prior exchange ratio. This strategic move, which would create a bank with over 1 trillion euros in assets and further consolidate Spanish banking, awaits supervisory approval before BBVA can approach Sabadell shareholders, particularly given Sabadell's shares already trade above BBVA's original premium.

Analysis

BBVA has executed a technical adjustment to its hostile takeover bid for Sabadell, modifying the exchange ratio to account for a 0.07 euro interim dividend paid by the target. The new offer consists of one BBVA share plus 0.70 euros in cash for every 5.5483 Sabadell shares, a slight change from the previous 5.3456 ratio, designed to maintain the offer's intrinsic value. This demonstrates BBVA's unwavering commitment to the acquisition. Notably, the total value of the bid has swelled from an initial 12 billion euros to approximately 15.5 billion euros, driven not by an improved offer but by the significant appreciation in BBVA's own stock price from 10.90 euros to 15.490 euros since the bid was launched. The deal's success faces a key challenge, as Sabadell's shares are already trading above the 30% premium originally offered, indicating that shareholders may require a more compelling offer to tender their shares. The entire process is now contingent on regulatory approval, after which BBVA can formally present the bid to Sabadell's shareholders for a final decision on a deal that would create a financial institution with over 1 trillion euros in assets.

Key Decisions for Investors

• Investors should recognize BBVA's offer adjustment as a sign of strong commitment to the acquisition, with the bid's increasing value tied to BBVA's own stock performance, a factor that could enhance its attractiveness if BBVA shares continue to rise.
• Given that Sabadell's stock is trading above the original offer premium, the market is pricing in the possibility of a sweetened bid or the deal failing; arbitrageurs should monitor for any signs of BBVA improving the terms to win over reluctant shareholders.
• The primary near-term catalyst is the pending supervisory approval, and a delay or rejection presents a significant risk that could cause the arbitrage spread to widen and negatively impact both stocks, making regulatory updates a critical monitoring point.