425: BBVA's Sabadell Bid Approved, Take-Up Period Begins

BBVA's offer for Banco Sabadell has been approved by the CNMV, with a take-up period starting September 8, 2025, presenting a significant premium and strategic benefits.

Summary

• The Spanish National Securities Market Commission (CNMV) has approved the transaction between BBVA and Banco Sabadell.
• The take-up period for Banco Sabadell shareholders to accept BBVA's proposal is scheduled to begin on Monday, September 8, 2025, and will run for 30 calendar days until October 7, 2025.
• The offer involves the exchange of one common share in BBVA plus 0.70 in cash for every 5.5483 Banco Sabadell shares.
• Banco Sabadell shareholders are expected to obtain a 13.6% stake in BBVA following the merger.
• The current equivalent value of the offer has increased by 43% since April 29, 2024, rising from an initial 12.2 billion to 17.4 billion.
• The offer represents a 30% premium over Banco Sabadell's closing price on April 29, 2024, and 42% over the weighted average price for the month prior to that date.
• Total synergies are estimated at 900 million per year following the merger, with full realization delayed to 2029 instead of 2028 due to a condition imposed by the Spanish Council of Ministers.
• Banco Sabadell shareholders are projected to obtain earnings per share (EPS) 25% higher than they would with a standalone Sabadell.
• For BBVA shareholders, the transaction is expected to be accretive in terms of EPS by around 57% from the first year following the merger, with an incremental Return on Invested Capital (ROIC) over 20%.
• The transaction is expected to have a limited impact on BBVA's CET1 capital ratio of approximately -34 basis points at closing, improving to +26 basis points once the sale of TSB and the extraordinary dividend are completed.

Sentiment

Score: 9

Explanation: The filing presents a highly optimistic and confident outlook on the proposed merger, emphasizing significant financial benefits for both sets of shareholders, strategic advantages, and BBVA's strong market position. The tone is promotional, highlighting premiums, EPS accretion, and synergy potential, with minimal acknowledgment of downsides beyond a minor synergy delay.

Positives

• The offer's current equivalent value represents Banco Sabadell's best valuation in more than a decade.
• The offer includes a significant premium: 30% over Banco Sabadell's closing price on April 29, 2024, and 42% over the weighted average price for the month prior, which is well above similar European banking transactions.
• Banco Sabadell shareholders are set to obtain earnings per share 25% higher than they would with a standalone Banco Sabadell.
• The transaction is accretive to BBVA's earnings per share by approximately 57% from the first year following the merger, with a high incremental ROIC over 20%.
• The impact on BBVA's CET1 capital ratio is limited at -34 basis points at closing, improving to +26 basis points after the TSB sale and extraordinary dividend.
• Estimated annual synergies of 900 million are expected to be fully realized in 2029.
• The merger creates a stronger bank with greater scale, enabling efficient investment in digital transformation, cybersecurity, data, and AI.
• The combined entity will increase its capacity to finance businesses and households by an additional 5.4 billion per year.
• BBVA has committed to unprecedented remedies to support SMEs and the self-employed, including guarantees to maintain future credit volumes.
• BBVA has demonstrated strong historical performance, with a total shareholder return of 397% from January 2019 through September 4, 2025, significantly outperforming European (+221%) and Spanish (+199%) banking sectors.

Negatives

• The full realization of estimated synergies (900 million per year) will be delayed by one year, to 2029 instead of 2028, due to a condition imposed by the Spanish Council of Ministers.
• Analysts forecast a potential downward correction of around -3% for Banco Sabadell shares, while BBVA shares could see an upside of up to +8%.

Risks

• BBVA's ability to complete the transaction.
• BBVA's ability to control Banco de Sabadell, S.A. following completion of the transaction.
• 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.
• General risks detailed in the Registration Statement and in BBVA's annual reports on Form 20-F and current reports on Form 6-K.

Future Outlook

BBVA has unveiled financial goals for the 2025-2028 period, indicating excellent prospects in terms of profit, capital generation, profitability, and value creation for shareholders. The transaction is expected to create significant future value for Banco Sabadell shareholders through higher EPS and for BBVA shareholders through EPS accretion and substantial synergies, despite a one-year delay in full synergy realization.

Management Comments

• "We invite Banco Sabadell shareholders to join this integration project with BBVA, the best possible partner, and a European leader in growth and profitability. Now is the time." BBVA Chair Carlos Torres Vila.

Industry Context

The financial industry is facing structural challenges, including the need for significant and growing investments in digital transformation, cybersecurity, data, and artificial intelligence. Greater scale is increasingly crucial for banks to spread these fixed costs across a broader customer base, thereby achieving greater efficiency. The European context, with anticipated increases in spending and investment, further intensifies the need for larger, more robust banking institutions.

Comparison to Industry Standards

• The offer's premium (30% over April 29, 2024, closing price; 42% over prior month's weighted average price) is approximately 30 percentage points above the average premium of similar transactions in the European banking industry over the past two years.
• BBVA's total shareholder return of 397% from January 2019 through September 4, 2025, significantly outperforms the European banking sector average (+221%) and the Spanish banking sector average (+199%), underscoring its distinctive strategy and execution.
• BBVA is described as having a unique combination of growth and profitability among large European peers, achieving record results in recent quarters.

Stakeholder Impact

• **Shareholders (Banco Sabadell):** Expected to receive a significant premium, higher earnings per share, and a stake in a larger, more profitable entity.
• **Shareholders (BBVA):** Expected to benefit from substantial earnings per share accretion, a high return on investment, and a stronger, more scaled bank.
• **Customers:** Will benefit from a stronger bank with greater scale, enhanced digital capabilities, and increased capacity to finance businesses and households.
• **Employees:** Will be part of a larger, more efficient entity, with the potential for new opportunities within the combined group.
• **SMEs and Self-employed:** Will benefit from unprecedented remedies and guarantees to maintain future credit volumes, which would not exist without this transaction.
• **Society as a whole:** Expected to benefit from the union of two highly complementary banks, contributing to progress and welfare.

Next Steps

• Banco Sabadell shareholders are invited to submit acceptance statements for the share exchange during the take-up period from September 8, 2025, to October 7, 2025.
• Preparation for the integration of the two entities will continue, enabling full realization of synergies in the first year following the merger (2029).
• Execution of the 1 billion share buyback announced by BBVA in April 2025 is planned post-closing of the voluntary tender offer.
• Capital generated from the TSB sale and the extraordinary dividend approved by Banco Sabadell is expected to be reinvested in shares of the combined entity.

Key Dates

Recommendation

The filing outlines a highly attractive offer for Banco Sabadell shareholders, featuring a substantial premium and significant EPS accretion. For BBVA shareholders, the transaction is also highly accretive to EPS with a strong return on invested capital and limited capital impact. The strategic rationale for increased scale, digital investment, and enhanced financing capacity is compelling, positioning the combined entity for strong future growth and profitability. Despite a minor delay in synergy realization, the overall financial and strategic benefits are overwhelmingly positive, suggesting a strong upside for investors in the combined entity.

Keywords

BBVA, Banco Sabadell, Merger, Acquisition, Banking, Financial Services, Tender Offer, Spain, Europe, CNMV, EPS Accretion, Synergies, CET1, Digital Transformation, SME Financing