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Spanish bank BBVA has offered a 30 per cent price premium to TSB-owner Banco Sabadell in a takeover bid that values its local rival at more than €12bn.
Disclosing the details on Wednesday of an offer it made the previous day, BBVA said a combination of the two lenders would create “one of Europe’s largest and most robust financial entities”.
With BBVA’s market capitalisation at just under €60bn, a successful deal would create a combined group close in value to Santander at €73bn.
There was no share price reaction to the details of the bid because Spanish markets were closed for a public holiday. Sabadell said on Tuesday that its board would “properly analyse all aspects of the proposal”.
BBVA said Sabadell shareholders would own 16 per cent of the combined entity. It is offering one newly issued BBVA share for every 4.83 Sabadell shares, valuing Sabadell at €12.3bn. That represented a premium of 30 per cent above closing prices on Monday and of 50 per cent above weighted average prices in the past three months, BBVA said.
Its greater scale “would allow the new entity to face the structural challenges of the sector in better conditions and reach a greater number of clients, efficiently addressing investment needs associated with digital transformation”, BBVA said.
Sabadell has a big roster of small business clients while BBVA is strong in retail banking and serving big corporate clients.
Referring to its target’s ownership of UK high street bank TSB, BBVA said: “Banco Sabadell’s presence in the UK would add to BBVA’s global scale and its leadership in Mexico, Turkey and South America.”
Michael Christodoulou, analyst at Berenberg, said before the details were revealed: “A potential deal between the two banks would make strategic sense, in our view. However, we believe that the immediate financial benefits from a deal may be modest.”
The two banks attempted to strike a deal four years ago at the height of the pandemic, but merger talks between the pair broke down after two weeks following disagreements over pricing.
The deal would bring together the third and fourth largest banks in the Spanish market, creating a lender with the biggest domestic balance sheet.
The combined group would account for 21 per cent of Spanish mortgages and 23 per cent of deposits, up from BBVA’s current share of 13 per cent and 14 per cent, respectively.
The two banks account for a combined 18 per cent of branches in Spain, just behind CaixaBank’s 20 per cent.
“We can see the merits for such a deal from the vantage of BBVA,” said Iñigo Vega, analyst at Jefferies, but he added it was unclear whether deal terms could be agreed.
Analysts have noted that a deal would dilute BBVA’s emerging market exposure, which accounts for 84 per cent of its earnings, according to Citigroup.