Spain’s second-largest bank, Banco Bilbao Vizcaya Argentaria SA (BBVA), is making headlines with its proposed €11.5 billion bid to acquire Banco de Sabadell SA. This unprecedented move signifies increasing competition within the Spanish banking industry, with BBVA looking to become the most significant domestic bank by assets.

The potential acquisition has broader implications, sparking concerns from Spain’s Economy Minister, Carlos Cuerpo. Issues raised include potential job losses and decreased competitiveness in the banking sector. However, the final say in the deal lies with the government.

BBVA’s existing offer closely mirrors a previously rejected bid made to Sabadell’s board, proposing that each new BBVA share would be exchanged for 4.83 Sabadell shares.

BBVA’s bid for Sabadell: potential implications

This denotes an 18% premium on Sabadell’s value based on last Wednesday’s closing price.

Given Sabadell’s Catalan roots, the bid has raised eyebrows within the financial world. Fears of resulting job losses and economic instability, notably within the Catalan economy, have led to heated debate. Despite this, cautious optimism within the financial community about the long-term benefits of such an acquisition remains.

BBVA insists the merger would birth a powerful new presence within the Spanish banking sector, boasting combined assets exceeding €1 trillion. The proposed consolidation could see BBVA and Sabadell’s combined market capitalization meeting that of Spain’s current largest lender, Banco Santander SA.

The proposal, however, hangs on the approval of over half (50.1%) of Sabadell’s shareholders and obtaining necessary antitrust and regulatory permissions. With BBVA’s previous attempt to
acquire Sabadell in 2020, failing due to unsuccessful price negotiations; this second proposal marks a critical moment in the bank’s strategic growth objectives.