The BBVA takeover bid (OPA) for Sabadell, launched in May this year, continues to face complications that could delay the closing of the operation until mid-2025.
The biggest obstacle now is the analysis by the National Commission on Markets and Competition (CNMC), which has decided to take the operation to phase 2 of review. So, this involves a more detailed study of the implications for competition in the Spanish financial market, which will slow the process.
What are the BBVA and Sabadell situations now?
Firstly, the CNMC, is examining the merger’s impact on the economic and social fabric, which will involve various associations and autonomous communities in its analysis, which could further prolong the outcome of the bid. Secondly, the Spanish government and European government will have to give the green light to the operation. Although this processes are advancing, BBVA is facing criticism regarding the proposed exchange ratio by investors.
Talked to @CNBC‘s @steve_sedgwick @cnbcKaren about our reasons to oppose @bbva‘s hostile bid for @BancoSabadell. pic.twitter.com/8wbjRf95C8
— Carlos Cuerpo (@carlos_cuerpo) May 10, 2024
Sabadell’s CEO, César González-Bueno, has called BBVA’s offer insufficient and lacking in transparency, as it does not consider discrepancies in the financial data of both entities, particularly in the small and medium-sized enterprises market.
Meanwhile, BBVA has updated its estimates of accounting profits from the operation, reducing expectations of gains derived from negative goodwill (badwill). This has raised concerns among analysts, who see a negative impact on the bank’s capital if the merger is completed.
Uncertainty also extends to the reputational and financial risks BBVA faces in other markets, such as its exposure in Mexico. These variables increase doubts about the viability of the takeover bid and the long-term benefit for both entities.
Moreover, the ongoing volatility in global markets, particularly due to inflationary pressures and interest rate hikes, adds another layer of complexity to the deal. Both banks are also dealing with internal restructuring efforts, which could be further strained by the merger. BBVA’s desire to enhance its digital banking capabilities through this acquisition has been highlighted as a key driver, but Sabadell’s integration could present operational challenges. Analysts believe that the outcome of this merger will set a precedent for future consolidations in the European banking sector, given the current economic climate.