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Spain-based lender Banco Sabadell has rejected a €12 billion takeover offer from its larger rival BBVA, saying the proposed deal “significantly undervalues” its standalone growth prospects.
Last week, BBVA unveiled a surprise offer for Sabadell, saying the merger of the two Spanish lenders would create “one of Europe’s largest and most robust financial companies.”
The rejection means BBVA must now decide whether to take the riskier route of launching a hostile bid in a country unaccustomed to such deals.
It is BBVA’s second attempt to take over Sabadell in less than four years. The latest offer had sent the potential buyer’s share price plummeting before the smaller bank’s board officially rejected the all-stock offer on Monday.
Sabadell, owner of major British bank TSB, said its board “believes that the proposal significantly underestimates Banco Sabadell’s potential and its standalone growth prospects.”
It added: “The board has great confidence in Banco Sabadell’s growth strategy and financial objectives and believes that Banco Sabadell’s standalone strategy will create value for its shareholders.”
BBVA responded by saying: “We regret that the board of Banco Sabadell rejected such an attractive offer.”
Bankers and regulators have long advocated for greater consolidation among Spanish banks, saying it would strengthen the sector’s resilience.
BBVA said last week that an acquisition of Sabadell would create a combined company with complementary customer bases and the scale needed to handle future interest rate cuts and the accelerated digitalization of finance.
However, some analysts had expressed doubts about the extent of the potential financial benefits that would arise from the proposed deal.
When BBVA launched its offering, the company had a market capitalization of just under €60 billion, but that has since fallen to €57.5 billion.
Sabadell said in its statement that “the recent significant decline and volatility in the BBVA share price increases uncertainty about the value of the proposal.”
When BBVA announced its offer, it said it was offering Sabadell a premium of 30 percent based on last Monday’s closing share prices and a 50 percent premium over the weighted average prices of the last three months.
The two banks tried to reach an agreement in 2020 during the Covid-19 pandemic, but talks collapsed due to disagreements over pricing.
Sabadell is advised by Goldman Sachs and Morgan Stanley. UBS and JPMorgan are advising BBVA on its offer, people briefed on the matter said.