Sabadell CEO expects BBVA to improve its offer for the bank

Sabadell CEO Cesar Gonzalez-Bueno expects BBVA to increase its €14.9 billion hostile takeover offer, asserting the current bid undervalues the bank and lacks merit, a view echoed by analysts despite BBVA's recent declaration against revising its offer. Gonzalez-Bueno further criticized BBVA's cost-saving assumptions as over-optimistic, citing the Spanish government's three-year block on a full merger, signaling a potentially challenging integration and protracted acquisition process.

Analysis

BBVA's hostile takeover bid for Sabadell, valued at approximately €14.9 billion, is encountering significant resistance that introduces uncertainty into the deal's completion. Sabadell's CEO, Cesar Gonzalez-Bueno, has publicly dismissed the offer as inadequate, stating he expects a higher bid and that the current proposal "lacks merits." This view is supported by market action, as Sabadell's shares have risen above the offer price, suggesting investors also anticipate a sweetened deal. Despite this, BBVA has indicated it will not raise its offer, setting the stage for a potential standoff. Complicating the deal's economics, Gonzalez-Bueno has also challenged BBVA's projected €900 million in cost savings as "over-optimistic," citing the Spanish government's three-year block on a full merger as a major impediment to realizing synergies. This regulatory constraint, coupled with the price disagreement, is reflected in the negative (-0.5) sentiment score for BBVA, signaling investor skepticism about the successful and value-accretive execution of the acquisition under the current terms.

Key Decisions for Investors

• Investors in Sabadell should weigh the potential for a higher bid from BBVA, as anticipated by management and the market, against the risk of the deal collapsing if no improved offer is made, which could lead to a sharp price correction.
• For BBVA investors, the current negative sentiment highlights the risks of a potentially costly bidding war and skepticism over the achievability of the stated €900 million in synergies, warranting caution and close monitoring of any adjustments to the offer terms.
• Event-driven investors should closely watch for the formal opinion from Sabadell's board and the October 7 shareholder tender deadline, as these are key catalysts that will influence the probability of a sweetened offer and the viability of merger arbitrage strategies.