BBVA yesterday published in detail its proposal for integration with Sabadell to, it says, create the third largest listed bank in Europe. It consists of a merger by absorption in which there would be no cash payment, but an exchange of shares that would give Sabadell the equivalent of 16% of the capital of the resulting group.
The proposal values Sabadell at almost 11,500 million euros, 17% above its current market capitalization of almost 9,800 million euros. If we take Monday's quote as a reference, before BBVA's intentions were known, the premium is 30%. And if you compare it with what Sabadell was worth when BBVA negotiated the merger in 2020, the difference is 4.5 times.
The exchange equation is one new BBVA share for every 4.83 Sabadell shares. Sabadell's shares are trading at 1.8 euros and BBVA's at 10.18 euros, so that at present you would have to put 5.6 shares of the former to buy one of the latter.
The operation would not leave a corporate trace of Sabadell, with its current registered office in Alicante and operational headquarters in Sant Cugat. A merger by absorption means the extinction through dissolution without liquidation of Sabadell and the en bloc transfer of its assets to the absorbing company, which would assume all its rights and obligations.
In the proposal there are also figures referring to the future. They start with the most sensitive, with good quality capital, which is what the ECB requires. The test of loose cotton for a movement of these characteristics. BBVA has good quality capital equivalent to 12.8% of its assets and estimates that the merger will only leave it with three tenths. It will still be well above the 9.1% minimum set by the central bank.
The figures that finish the accounting game are that of the cost of restructuring, which will approach 1,450 million euros, and that of the expected savings, of 850 million euros. These two expressions usually equate to template cuts.
Then come the political and labor considerations. Apart from promising that the bank will have two operational headquarters, in Madrid and Sant Cugat, and will use the BBVA Sabadell brand in specific territories, BBVA is committed to granting Sabadell three seats on the future board of directors.
BBVA's board currently has fifteen members, ten of whom are independent. The members of Sabadell would not be considered executives, despite the fact that one of them would become vice-president of the council.
Another sensitive issue is the integration of teams. BBVA says it will create a specific committee with representatives from the two banks to design the new stage. When it comes to joining the templates, "professional competence and merit will be taken care of, without the adoption of traumatic measures or that uniquely affect employees originating from one of the two entities", he says.
He also says that "proportionality" will be kept in future management teams based on the relative weight of each bank's business. Sabadell, for example, is better in SME banking, while BBVA is stronger in commercial. There would also be a specific advisory council for Spain with "institutional relevance".
In its letter, BBVA's board of directors does not hide its ambition to become one of the great European banks. To its activity in Spain, Mexico and Turkey will be added the local business of Sabadell and the British business of the subsidiary TSB. His is "the most attractive industrial project of European banking", and there is "the ambition to be the largest bank by market capitalization in the euro zone".
The assets of the resulting entity would exceed a billion euros, while the client portfolio would exceed 100 million. Is there no risk of gigantism? The bank argues that, since it will have more scale, it will be able to respond better to the structural challenges of the sector and gain in competitiveness and profitability. And how will this affect the competition? It recognizes that the approval of the Ministry of Economy and the competition authority, the CNMC, will be necessary.
For now, the proposal is already made. Now we need to know what Sabadell thinks. "We are ready to proceed immediately with the operation", says the bank. It is awaiting Sabadell's assessment "as soon as possible" to "be able to present without delay a common fusion project".
