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BBVA makes unexpected $12.4b bid for Sabadell

BBVA makes unexpected $12.4b bid for Sabadell

"Unexpected Bid"

In an unexpected move, Spain’s second-largest bank, Banco Bilbao Vizcaya Argentaria SA (BBVA), launched an aggressive $12.4 billion all-share bid for Banco de Sabadell SA, bypassing Sabadell’s board. This audacious tactic increased uncertainty between the two financial powerhouses, highlighting a high-stakes game of power within Spain’s banking sector.

BBVA’s sudden proposal to shareholders comes after Sabadell’s management rejected a similar offer on April 30. The Spanish authorities have voiced concerns about potential job losses and a decline in market competition, leading BBVA to take the bold step of approaching shareholders directly.

Spain’s Economy Minister, Carlos Cuerpo, expressed alarm at the prospect of such an acquisition, hinting it could lead to unpredictability and inadequacies in Spain’s economic landscape. Cuerpo urges stakeholders to ponder the long haul implications of their decisions and prioritize Spain’s overall economic steadiness.

Financial expert Nuria Alvarez of Renta 4 has advocated for rejection of the bid, considering it unappealing based on the current market valuations.

BBVA’s bold bid strategy for Sabadell

Yet, the market response was mixed – BBVA’s shares dropped 6%, Sabadell’s rose by 3%. Despite these swift reactions, the long-term implications remain a matter of speculation.

BBVA’s initial offer was rejected by Sabadell on the grounds that it undervalued the bank’s growth potential. BBVA’s Chairman, Carlos Torres, argues that the drop in BBVA’s shares after the initial offer leak has undermined any chances of bettering the terms.

BBVA’s recurring bid only succeeds if a minimum of 50.1% Sabadell shareholders approve, plus requisite green lights from antitrust and regulatory entities. This signifies BBVA’s second try at acquiring Sabadell, following an unsuccessful initial operation in late 2020.

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Should the merger occur, a new banking titan would dominate Spain’s financial sector, with a balance sheet exceeding €1 trillion, rivaling Banco Santander SA, the country’s largest bank. While the merger would be a game-changer, it’s feasibility hinges heavily on successfully navigating assorted regulatory and systemic complexities.

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