BBVA has recently announced a significant improvement to its offer for Banco Sabadell, marking what may very well be its most compelling proposal to date. The financial institution revealed a 10% enhancement on its previous offer, opting for a transaction model that is entirely comprised of share swaps, thereby alleviating the tax implications that shareholders would face should they have to exchange cash. Previously, the offer included a combination of shares and cash, which not only undervalued Sabadell’s shares but also forced shareholders to incur a tax liability on any gains. As a result, the move left many Sabadell investors at a loss during the offers.
The new arrangement stipulates that BBVA will issue one new share for every 4.8376 Sabadell shares. This is a marked improvement from the prior terms, which involved 1 share plus €0.7 for every 5.5438 shares of Sabadell. This updated deal appraises Sabadell at €3.29 , reflecting a 2.8% increase over previous evaluations. Following the announcement, Sabadell’s shares plummeted by 3.9% to €3.21 , while BBVA’s stock experienced a 2.6% drop to €15.98 . Nevertheless, this newly renewed offer brings a sense of optimism to the transaction, as it helps restore investor confidence for the first time since January. Until now, shareholders were losing money with the share exchange.
This strategic move from BBVA has effectively quieted much of the surrounding market speculation. Carlos Torres, the head of BBVA, has made his intentions transparent and firm. BBVA has committed to either enhancing the offer further or extending the deadlines —a move that is yet to clarify whether it will lower the minimum acceptance threshold from 50% to 30%. This aspect is particularly critical because it could have significant consequences: First, if BBVA does not achieve majority support for the takeover, it would be obliged to launch a second cash offer at an equitable price set by the CNMV (Spain’s securities market regulator). Secondly, shareholders who participated in the initial exchange would lose the opportunity for tax deferral, meaning they would be liable to the Treasury for any previously accrued gains.
In the event of a mandatory second offer, there is no guarantee that the price would surpass the current valuation of Sabadell, which stands at €3.29 based on the current exchange. The CNMV’s criteria for determining this equitable price remain vague. Moreover, as it stands, the full cash exchange means that participating shareholders will also face taxation on the gains, subject to rates ranging from 19% to 28% depending on the amount accrued.
According to the revised structure, Sabadell shareholders would secure a 15.3% stake in BBVA , slightly up from the previous 13.6% offered, yet less than the 16.2% initially proposed by Torres when he announced the hostile takeover back in May 2024. This discrepancy reflects adjustments made to account for dividend payments from both banks.
The Challenge of Attracting Shareholders
The success of BBVA’s takeover is contingent on persuading minority shareholders to accept the offer. This could prove challenging due to the deep-rooted emotional and financial ties many have with Banco Sabadell. Nearly 50% of the bank’s capital is in the hands of small investors, with about 80% of these shareholders also being Sabadell customers. Despite this, BBVA holds hope that the neutral tax implications of share exchanges will be enticing enough to tip the scale in their favor.
Institutional investors hold the remaining half of Sabadell’s capital—about 30% of which is in the hands of long-standing funds that typically engage in such deals upon perceiving improved offers. Another 15% adheres to an indexed strategy linked to broader market indices. Zurich, an insurer, holds approximately 4.7% of the shares, rooted in a partnership for insurance marketing with Sabadell, while 3% is held by opportunistic funds that often engage in arbitrage situations, although their involvement has notably decreased.
Currently, the acceptance period for the offer is on hold as BBVA awaits approval from the CNMV for a new prospectus. The regulatory body has three business days to respond. Following this approval, Sabadell will evaluate the proposal through external consultants, a process expected to last five days after the authorization—potentially extending into early November. The prior acceptance period was scheduled to conclude on October 7 but will now see an extension, possibly lasting until October 10 or 13, pending confirmation.
Looking ahead, BBVA will likely announce the result of the offer by mid-October. Based on the percentage of shares accepted, the bank will decide whether to withdraw or proceed with a second cash offer, which would entail higher costs for their shareholders. A successful scenario for BBVA, seeing acceptance of more than 50% of voting rights, would culminate the takeover saga that has stretched over 16 months . This unfolding story in the financial sector holds significance not just for the banks involved but also for the wider market dynamics as shareholders weigh their options.