Background and Key Players
The Spanish President, Pedro Sánchez, now holds the power to determine the future of BBVA’s takeover attempt (OPA) of Sabadell. The Ministry of Economy has elevated the study of this OPA to the Council of Ministers, giving Sánchez one month to impose additional requirements if deemed necessary for the general interest. However, if the conditions jeopardize the deal’s profitability, BBVA might be compelled to abandon the pursuit.
The Minister’s Decision
According to the Ministry of Economy, Sánchez can impose these conditions for reasons distinct from safeguarding competition. These reasons include maintaining sector regulatory objectives, protecting workers, ensuring territorial cohesion, promoting research and technological development, and advancing social policy goals.
Sector Reaction and Legal Precedents
The decision did not surprise the financial sector, as the Economy Minister expressed concern about this OPA since its presentation a year ago. He even initiated a public consultation for citizens to voice their opinions on the operation.
Under Spanish law, the government has 30 natural days to enforce or maintain conditions set by the Competition Authority in a merger. This period ends on June 26 if the government adheres to deadlines. The regulation is clear, but there’s a risk of political considerations influencing the decision, given the strong opposition from the government’s parliamentary allies.
This legal option has only been used once before, in the Antena 3 and La Sexta merger in 2012. The then PP government softened the conditions imposed by the Competition Authority.
Conditions Set by CNMC
BBVA’s president, Carlos Torres, had to make last-minute concessions as the Competition Authority refused to authorize the OPA without approval from all five members, including the one proposed by Junts. The conditions were eventually agreed upon, ensuring BBVA’s commitment to maintaining long-term credit volume for 85% or more of small businesses whose financing is primarily with BBVA and/or Sabadell for three years, extendable by two more.
The most significant concession is that the 85% threshold reduces to 50% in Catalonia and Baleares, where BBVA and Sabadell’s combined market share exceeds 30%, and Sabdell’s share equals or exceeds 10%.
Next Steps
If successful, BBVA aims to absorb Sabadell, similar to CaixaBank’s acquisition of Bankia. This strategy would allow BBVA to realize 850 million euros (962.42 million USD) in cost savings, primarily through technological efficiencies rather than workforce reductions.
BBVA plans to eliminate Sabadell’s technology platform and reduce central services but maintain the corporate center in San Cugat. If forced to keep Sabadell as a subsidiary due to government intervention, BBVA believes it can still achieve two-thirds of the announced 850 million euros in savings without significant staff cuts.
Path to Merger
The integration of both banks into a single entity would occur at a later stage, contingent on the OPA’s success and Sabadell’s transformation into a BBVA subsidiary with a remodeled board of directors. This process requires approval from both banks’ boards, ratification in a shareholders’ meeting, and the green light from the Ministry of Economy—the most challenging step in a series of nearly 30 required authorizations.
BBVA anticipates a full integration between six and eight months, though sources close to the process suggest a more pessimistic timeline of up to 18 months. Carlos Torres recently indicated a preference for preserving the Sabadell brand in Catalonia, its birthplace.
Key Questions and Answers
- What is the OPA? An OPA, or offer for takeover, refers to BBVA’s attempt to acquire Sabadell.
- Who has the final say on OPA conditions? Spanish President Pedro Sánchez, after the Ministry of Economy presents the case to the Council of Ministers.
- What are BBVA’s primary objectives if the OPA succeeds? BBVA aims to absorb Sabadell, realizing cost savings and maintaining technological efficiencies without substantial workforce reductions.
- What are the significant concessions BBVA made to secure OPA approval? BBVA committed to maintaining long-term credit volume for 85% of small businesses primarily financed by BBVA and/or Sabadell for three years, with the threshold reduced to 50% in Catalonia and Baleares.
- What is the timeline for integrating both banks into one entity? BBVA anticipates a full integration between six and eight months, though the process could extend up to 18 months depending on various factors.
