The board of Banc Sabadell today rejected the merger proposal launched last week by BBVA, according to the statement sent to the CNMV. The decision - announced by La Vanguardia - occurred during the board of directors meeting held today in Madrid to analyze the absorption project. Sabadell's governing body, chaired by Josep Oliu, considers that the bank's strategy "as an independent entity will generate greater value for its shareholders." After Sabadell's positioning, BBVA sources said: "we regret that the board of Banco Sabadell has rejected such an attractive offer."
In the statement, the bank assures that "the proposal significantly undervalues Banc Sabadell's project and its growth prospects as an independent entity." The bank's governing body considers that “the significant drop and volatility in BBVA's share price in recent days generates additional uncertainty about the value of the proposal.” According to the council, the decision to choose to reject the proposal is “aligned with the interest of Banc Sabadell's clients and employees.”
From now on the ball is once again in BBVA's court, although in Spain there have hardly been any bank purchase operations that were not negotiated. In this process that began last Tuesday, BBVA has always defended that its intention is to carry out an agreed operation in a friendly manner.
Today is the second time that Sabadell rejects a merger with BBVA. Although in reality in neither case was it a real merger but rather an absorption of Sabadell.
In November 2020, the operation collapsed because the entity chaired by Oliu considered the offer that BBVA put on the table on the table very low and which was speculated to be around 2.5 billion euros. Today the bank's capitalization multiplies that figure by four.
Sabadell's stock has grown more than 300% since the failed merger in 2000 precisely due to the plan that the entity implemented to remain independent. Sabadell changed its CEO, Jaume Guardiola, for César González-Bueno. In parallel, Oliu left executive functions. The new team cleaned up the British subsidiary TSB although it initially wanted to be sold.
The proposed merger by absorption of BBVA valued Sabadell at almost 11.5 billion euros. If the price on Monday of last week is taken as a reference, before BBVA's intentions were known, the premium is 30%. And if it is compared to what Sabadell was worth when BBVA negotiated the merger in 2020, the difference is 4.5 times. The exchange ratio is one new BBVA share for every 4.83 Sabadell shares.
Today's decision by the Sabadell board is the first taken by the entity after last Tuesday BBVA revealed its intentions regarding the bank born in Sabadell and which moved its headquarters to Alicante in 2017. The next day in a letter, the bank chaired by Carlos Torres stated the basic data of the offer in which it highlighted that the absorption of Sabadell would be paid with BBVA shares. No cash exchange.
Additionally, BBVA offers three positions on the board of directors and one vice presidency. If the current president of Sabadell, Josep Oliu, occupied that vice presidency and three other current directors went to the BBVA board, there would be another 10 from Sabadell that would be left out of the new entity. According to the proposed exchange equation, current Sabadell shareholders would own 16% of the shares of the new BBVA.
The meeting of the Sabadell board has met in Madrid despite the fact that the entity's headquarters are in Alicante and the operational headquarters in Sant Cugat del Vallès.
Sabadell has hired Goldman Sachs and Morgan Stanley to advise them in the process, in addition to Uría Menéndez to address the legal aspects. On the other hand, BBVA has also turned to large international banks and has the assistance of JPMorgan and UBS.
A merger with BBVA would require not only an agreement between the two boards, but also the approval of an extraordinary meeting of Banc Sabadell shareholders, which would have to approve the extinction of the company to be absorbed by the bank chaired by Carlos Torres.
