425: BBVA Launches Offer to Banco Sabadell Shareholders Aiming for Merger

BBVA has launched an all-share offer to Banco Sabadell shareholders to merge the two banks, creating a stronger and more competitive entity.

Summary

• BBVA has launched an offer to Banco Sabadell shareholders to merge the two banks.
• The offer is an all-share transaction with an exchange ratio of one new BBVA share for every 4.83 Banco Sabadell shares.
• BBVA aims to create a stronger, more competitive, and profitable entity with greater scale to address structural challenges in the financial sector.
• The merged bank will have two operational headquarters in Spain: one in Sant Cugat del Valls (Barcelona) and the other in Madrid.
• BBVA estimates synergies of €850 million before taxes from the merger.
• Restructuring costs are estimated at €1.45 billion before taxes.
• BBVA expects a limited impact on its CET1 ratio of approximately -30 basis points assuming 100% uptake.
• The transaction is expected to increase earnings per share for Sabadell shareholders by about 27 percent.
• BBVA intends to lend an additional €5 billion per year to families and businesses after the merger.
• The approval of the capital increase at the Extraordinary Shareholders Meeting was one of the conditions established in the acquisition offer made to Banco Sabadell shareholders.
• The acceptance period for the share exchange for Banco Sabadell shareholders will take from 30 to 70 natural days.
• BBVA estimates that the merger will take between 6 and 8 months more, so the integrations should conclude by mid-2025.

Sentiment

Score: 7

Explanation: The document presents a positive outlook on the proposed merger, highlighting the potential benefits for shareholders, customers, and employees. However, it also acknowledges the associated risks and costs, resulting in a moderately positive sentiment score.

Positives

• The transaction is expected to create a stronger and more competitive bank.
• Banco Sabadell shareholders will receive a premium for their shares.
• Earnings per share are expected to increase for Banco Sabadell shareholders.
• The merged entity will be able to lend more to households and businesses.
• Customers will benefit from a wider range of products and a more global reach.
• Employees will have access to new career and growth opportunities.
• The Sabadell brand will continue to be used alongside the BBVA brand in certain regions.
• BBVA is committed to maintaining Banco Sabadell's management model for small and medium-sized companies.
• BBVA has pledged to maintain the working capital facilities of all small and medium-sized companies for at least 12 months.

Negatives

• Restructuring costs associated with the merger are estimated at €1.45 billion before taxes.
• Less than 10 percent of the branches from the integrated bank in Spain will be closed (the equivalent of 300 of the 870 branches with a proximity of less than 500 meters).
• The number of Banco Sabadell shares in circulation held by shareholders other than BBVA could be significantly reduced, impacting the liquidity of its shares.

Risks

• The transaction is subject to regulatory approvals, including from the Spanish Securities Market Commission (CNMV) and the European Central Bank.
• There are potential risks related to the integration of the two businesses.
• The combined company may be unable to achieve synergies or it may take longer than expected.
• There is a risk of disruption of management time from ongoing business operations.
• The transaction could have an adverse effect on the ability of BBVA or Banco Sabadell to retain customers and key personnel.
• The market price of BBVA shares could be adversely affected by matters relating to the transaction.
• There is a risk of potential loss of businesses (i.e. negative revenue synergies) as a result of the transaction.

Future Outlook

BBVA expects the merger to be completed by mid-2025, subject to regulatory approvals and shareholder acceptance. The combined entity aims to achieve significant synergies and increase lending to households and businesses.

Management Comments

• The aim is ultimately to merge the two banks, to build a stronger, more competitive and profitable entity and erect a benchmark within the market in terms of assets, loans and deposits.
• BBVA remains firmly committed to all the markets in which it operates, and from a position of strength it will intensify its support for businesses and for cultural, scientific and social projects.
• BBVA is committed to ensuring that no one is denied access to financial services.
• BBVA is fully committed and deeply rooted in the regions within its footprint, especially those where Banco Sabadell is most strongly present: Catalonia and the Valencia region.

Industry Context

This announcement reflects the ongoing consolidation trend in the European banking sector, driven by the need to achieve greater scale, improve efficiency, and invest in digital transformation. Other recent mergers and acquisitions in the sector include the merger of CaixaBank and Bankia in Spain, and the potential acquisition of Commerzbank by UniCredit.

Comparison to Industry Standards

• The estimated synergies of €850 million are significant, but in line with other large bank mergers in Europe.
• The restructuring costs of €1.45 billion are also comparable to other similar transactions.
• The expected impact on BBVA's CET1 ratio of -30 basis points is relatively small, indicating a well-structured deal.
• The premium offered to Banco Sabadell shareholders is in line with market standards for takeover bids.

Stakeholder Impact

• Shareholders of both BBVA and Banco Sabadell are expected to benefit from the merger through increased earnings per share and potential synergies.
• Customers will have access to a wider range of products and services and a more extensive branch network.
• Employees will have new career and growth opportunities within the combined entity.
• The merger is expected to contribute to economic and social progress through increased lending and tax contributions.

Next Steps

• Obtain regulatory approvals from the Spanish Securities Market Commission (CNMV), the European Central Bank, and other relevant authorities.
• Secure acceptance of the offer from a minimum of 50.01 percent of Banco Sabadell shareholders.
• Complete the capital increase approved by BBVA's Extraordinary Shareholders Meeting.
• Merge the two banks, integrating their operations and systems.
• Negotiate with Banco Sabadell partners for each of the existing agreements.
• Achieve the estimated synergies and cost savings.
• Increase lending to households and businesses.

Key Dates