425: BBVA Launches Voluntary Takeover Bid for Banco Sabadell

BBVA has received authorization for its voluntary takeover bid for all shares of Banco Sabadell, offering a mixed consideration of newly issued BBVA shares and cash.

Summary

• BBVA's voluntary takeover bid for all shares of Banco Sabadell has been authorized by the Spanish National Securities Market Commission (CNMV) on September 5, 2025.
• The offer is a mixed consideration: one (1) newly issued ordinary share of BBVA and 0.70 in cash for every 5.5483 ordinary shares of Banco Sabadell.
• The cash component includes compensatory adjustments for interim dividends paid by BBVA on October 10, 2024, and April 10, 2025.
• The total cash equivalent of the offer consideration is 9,905,510,774 based on BBVA's weighted average share price for the quarter prior to May 9, 2024.
• If calculated with BBVA's closing price as of September 1, 2025, the total consideration amounts to 14,758,885,831.
• The offer consideration consists of approximately 4.3% cash and 95.7% shares, based on September 1, 2025, information.
• The offer is subject to a Minimum Acceptance Condition: BBVA must acquire at least more than half of Banco Sabadell's voting rights (excluding treasury stock).
• Key regulatory approvals, including BBVA's capital increase approval (July 5, 2024), UK PRA authorization for TSB Bank plc (September 2, 2024, extended to March 2, 2026), and Spanish antitrust authorization (April 30, 2025, with conditions, confirmed by Council of Ministers on June 24, 2025), have been fulfilled.
• The Council of Ministers imposed a condition requiring BBVA and Banco Sabadell to maintain separate legal personalities, assets, and autonomous management for at least three years (extendable by two), particularly concerning financing/credit to SMEs, human resources, branch networks, and social work.
• BBVA considers the Council of Ministers' condition unlawful and has filed a contentious-administrative appeal with the Spanish Supreme Court on July 15, 2025.
• BBVA intends to promote a merger between the two entities once the Council of Ministers' condition ceases to be in force or is annulled.
• BBVA may waive the Minimum Acceptance Condition if it acquires at least 30% of Banco Sabadell's voting rights, which would then trigger a mandatory cash takeover bid for the remaining shares.
• BBVA holds 4,464 Banco Sabadell shares as of September 1, 2025, for customer derivatives positions.
• The acceptance period for the offer is 30 calendar days from the publication of the first announcement.
• BBVA will issue up to 905,444,502 new ordinary shares with a par value of 0.49 each to cover the share consideration, requiring a maximum nominal capital increase of 443,667,806.
• Assuming 100% acceptance, Banco Sabadell shareholders would own approximately 13.6% of BBVA, and current BBVA shareholders would own approximately 86.4%.

Sentiment

Score: 6

Explanation: The filing announces the authorization of a significant takeover bid, which is strategically positive for BBVA's growth. However, the imposed regulatory conditions by the Council of Ministers introduce substantial delays in synergy realization and operational integration, and BBVA's legal challenge adds an element of uncertainty and potential prolonged legal battles. The offer structure is clear and financed, but the path to full integration is complicated.

Positives

• Authorization for the voluntary takeover bid has been granted by the CNMV.
• Key regulatory approvals (BBVA shareholder capital increase, UK PRA, Spanish antitrust) have been fulfilled.
• BBVA believes the takeover creates value for shareholders of both entities.
• BBVA has secured financing for the cash component and 'picos' (fractional shares) through unavailable cash deposits totaling 701,462,226 for the cash consideration and 2,300,000 for picos.
• BBVA plans to maintain its shareholder remuneration policy (40-50% of consolidated ordinary profit, plus excess capital over 12% CET1 ratio).
• BBVA expects to promote the renewal of Banco Sabadell's wholesale financing under better conditions due to BBVA's stronger market position.

Negatives

• The Council of Ministers imposed a condition delaying full integration and synergy realization for at least three years, requiring separate management in key areas (SMEs, HR, branches, social work).
• BBVA considers the Council of Ministers' condition unlawful and has filed a legal appeal, introducing uncertainty.
• The materialization of estimated synergies will be delayed due to the Council of Ministers' condition.
• If BBVA waives the Minimum Acceptance Condition (acquiring 30-50% of voting rights), it would be obliged to launch a mandatory cash takeover bid, which could significantly increase financing needs.
• U.S. shareholders are advised to consider not participating if their decision is affected by a potential waiver of the Minimum Acceptance Condition, as they would lose withdrawal rights under U.S. regulations.
• The offer is not subject to fair price rules for mandatory takeover bids, as it is voluntary.
• BBVA has not had access to non-public information from Banco Sabadell.
• The pay-out ratio of Banco Sabadell's shareholder remuneration policy after the offer may be lower, equal to, or higher than currently established.

Risks

• BBVA's ability to complete the transaction.
• BBVA's ability to control Banco de Sabadell, S.A. following completion of the transaction, especially with the Council of Ministers' condition.
• Limitations on the information about Banco Sabadell to which BBVA has had access.
• BBVA's ability to fully realize the expected benefits and synergies of completing the transaction, particularly due to the delay imposed by the Council of Ministers' condition.
• Uncertainty regarding the outcome of BBVA's appeal against the Council of Ministers' condition.
• Potential for a mandatory cash takeover bid if BBVA waives the Minimum Acceptance Condition and acquires between 30% and 50% of voting rights, leading to significant and variable financing needs.
• The 'Extraordinary Dividend' from Sabadell is subject to the consummation of the TSB Sale Transaction, which has no certainty of completion.
• The statements and intentions regarding BBVA's plans may not be applicable if BBVA acquires less than 50% of Banco Sabadell's voting rights.

Future Outlook

BBVA intends to take control of Banco Sabadell and integrate it into the BBVA Group, promoting a merger once the Council of Ministers' condition (requiring separate operations for 3-5 years) ceases to be in force or is annulled by the Supreme Court. The merger is estimated to be completed within six to eight months after the decision by competent corporate bodies. BBVA expects to realize synergies, although their materialization will be delayed by the condition. BBVA plans to maintain its shareholder remuneration policy and optimize Banco Sabadell's financial structure and wholesale financing.

Management Comments

• BBVA believes that the takeover of Banco Sabadell and its integration into the BBVA Group creates value for the shareholders of both entities.
• BBVA considers that the Condition of the Council of Ministers is not in accordance with the law and, by virtue of this, has proceeded to file the corresponding contentious-administrative appeal before the Spanish Supreme Court.
• BBVA does not intend to waive the Minimum Acceptance Condition... although it may decide to do so in view of the circumstances prevailing at that time.
• BBVA considers both its staff and Banco Sabadell's staff to be one of its main assets, with talent management being a fundamental priority to maintain the competitive advantages of the combined entity.

Industry Context

This is a significant consolidation move in the Spanish banking sector, aiming to create a larger, more competitive entity. The regulatory conditions imposed by the Council of Ministers highlight the government's concern for market competition and specific stakeholder protection (e.g., SMEs, employment) in large-scale banking mergers, reflecting a broader trend of increased scrutiny on financial sector consolidation in Europe. The delay in full integration could impact the speed at which the combined entity can realize efficiencies compared to other mergers that face fewer such restrictions.

Comparison to Industry Standards

• The mixed consideration (95.7% shares, 4.3% cash) is a common structure for large bank mergers, aiming to preserve capital and offer shareholders continued exposure to the combined entity.
• The regulatory conditions imposed by the Council of Ministers, particularly the requirement for autonomous management in certain areas for 3-5 years, are more stringent than typical antitrust approvals seen in other European banking mergers, which often focus on divestitures or behavioral remedies but rarely mandate such a prolonged operational separation post-acquisition of control. For example, in the merger of Intesa Sanpaolo and UBI Banca in Italy, conditions primarily focused on branch divestitures rather than prolonged operational autonomy.
• BBVA's commitment to a 40-50% payout ratio and distributing excess capital above 12% CET1 is in line with leading European banks that aim to return capital to shareholders while maintaining strong solvency.

Management Changes

Corporate Governance

Legal Proceedings

• BBVA has filed a contentious-administrative appeal before the Spanish Supreme Court on July 15, 2025, challenging the legality of the additional condition imposed by the Council of Ministers on June 24, 2025, regarding the economic concentration. The appeal is pending resolution.

Stakeholder Impact

• Shareholders (Banco Sabadell): Will receive a mixed consideration (shares and cash) for their shares, potentially becoming BBVA shareholders (approx. 13.6% of BBVA if 100% acceptance). Those with fractional shares will receive cash.
• Shareholders (BBVA): Will see their stake diluted to approximately 86.4% (assuming 100% acceptance) but are expected to benefit from the value creation and synergies of the combined entity in the long term.
• Employees (Banco Sabadell): No specific plans for job maintenance for the next 12 months due to the Council of Ministers' condition. Post-condition, BBVA intends to implement an integration process seeking to preserve talent, but staff synergies could lead to job impacts.
• Customers (SMEs of Banco Sabadell): The Council of Ministers' condition mandates autonomous management of financing and credit policy for SMEs for at least 3-5 years, aiming to protect their access to credit.
• Customers (General): Potential for rationalization of the combined entity's branch network and efficiencies in central services once the merger can proceed, which could affect service points.
• Regulatory Authorities: The transaction is subject to ongoing scrutiny, particularly the legal challenge against the Council of Ministers' condition, and requires adherence to various national and international banking regulations.

Next Steps

• Acceptance period of the Offer (30 calendar days from publication of first announcement).
• BBVA to calculate the number of BBVA shares to be issued and picos to be paid after the offer result.
• BBVA to promote actions for availability of Banco Sabadell shares to Iberclear.
• Iberclear to issue a certificate attesting to Banco Sabadell shares made available.
• BBVA's Board of Directors to execute the capital increase and award new shares.
• Public deed of capital increase to be submitted for registration in Commercial Registry of Bizkaia.
• Newly issued BBVA shares to be registered with Iberclear and its participating entities.
• Admission of newly issued BBVA shares to trading on Spanish, Mexican, and London Stock Exchanges.
• Settlement and payment of Cash Consideration and Picos.
• BBVA to pursue its contentious-administrative appeal against the Council of Ministers' condition before the Spanish Supreme Court.
• Once the Council of Ministers' condition ceases or is annulled, BBVA intends to promote a merger by absorption of Banco Sabadell.
• BBVA will review Banco Sabadell's shareholder remuneration policy after the settlement of the Offer.
• BBVA plans to carry out a detailed review and analysis of Sabadell Group's corporate structure to identify optimization measures.
• If requirements are met, BBVA will exercise the right of forced sale (squeeze-out) of remaining Banco Sabadell shares, leading to delisting.

Key Dates

Recommendation

While the takeover bid presents a strategic growth opportunity for BBVA, the significant regulatory condition imposed by the Council of Ministers introduces considerable uncertainty and delays the realization of expected synergies for at least three to five years. BBVA's legal challenge against this condition adds another layer of risk and potential for prolonged legal battles. For existing shareholders of both entities, the immediate future involves navigating these complexities. A 'hold' recommendation is appropriate as the long-term value creation is still plausible, but the short-to-medium term is clouded by integration delays and legal uncertainties, making a 'buy' or 'sell' premature without further clarity on the regulatory outcome and integration path.

Keywords

Takeover bid, M&A, banking, Spain, BBVA, Banco Sabadell, financial services, merger, capital increase, regulatory approval, antitrust, shareholder offer, stock exchange, corporate governance, TSB Bank