We are experiencing turbulent movements in the national banking sector. As I wrote a few months ago in OKDIARIO, for the second time in three and a half years, BBVA have you tried to buy the Bank of Sabadell in a friendly manner, after having failed in both cases. Just hours after Sabadell’s board rejected the offer as insufficient, BBVA launched a hostile takeover bid to try to acquire the Catalan-born bank, now based in Valencia. After a few months, the operation still remains unclear.
In my opinion, BBVA missed the point. Everything seems to indicate that he rushed to try again an already failed operation, without taking into account the problems that could arise along the way.
On the one hand, he might have underestimated the risks of a setback from regulators or the government itself. So, although the National Securities Market Commission (CNMV) admitted the prospectus for processing in June, but has not yet commented on the matter. Even if the ECB’s non-opposition to the operation could pave the way for approval by the CNMV, it is likely that the latter will not make a decision until the National Markets and Competition Commission (CNMC) will not do so, which could prolong its decision. until 2025, where it could authorize the operation or impose conditions on it, such as the forced sale of part of the business, which would lead to a reduction in synergies for BBVA.
BBVA is thus faced with a terrible dilemma, which does not depend on it: on the one hand, whether or not the CNMC decides to move on to phase II, which would lead to entering into 2025 to issue its opinion if he decides to go through this phase; On the other hand, the CNMV must decide whether it launches the operation in advance or waits for the opinion of the CNMC. Thus, if this last hypothesis comes true, it could lead a majority of shareholders not to attend due to the uncertainty it would generate; or if the CNMV wait for the opinion of the CNMC and it becomes longer, such a long period can make the operation lose interest and cause the operation itself to fail.
Finally, the Government, which cannot prevent the takeover bid, could do not allow mergewith, again, the loss of synergies that this would generate.
On the other hand, he made a mistake because if in three and a half years he does not see any other form of non-organic growth than trying to buy the same bank, which is also more expensive, it does not seem that his business strategy being the most effective, showing a certain weakness.
And once again the boat is missing due to the limited interest that the offer may represent for the Sabadell shareholders. It does not seem logical to try to reach an amicable agreement with the conditions proposed by the Basque bank. So shareholders would receive a paper payment, i.e. an exchange of shares, virtually nothing in cash – except for the offer discount which now includes a cash payment for the interim dividend paid by BBVA, but nothing more; In fact, this minimal improvement only shows that the offer seemed and seems insufficient, that deciding to accept the offer does not seem very attractive.
Furthermore, his future profitability could be affected, since the risk that Sabadell now has is that of Spain and the United Kingdom, where it carries out its activities, while the resulting entity has them more between Turkey, Venezuela, Mexico and the Argentina, which represents a lower quality risk. . In addition, the risk that a special tax will be imposed on banks in Mexico – currently excluded – increases the risk that the activities of banks in this country are carried out, in addition to the risk inherent in the fact that the business obtained in this country is closely related to changes in the financial situation. the Mexican economy itself, more risky and volatile.
Secondly, to Sabadell town hall It doesn’t offer him much either, three board positions, with a vice-president, although this is perhaps where BBVA has been most generous.
Third, for the operation to be profitable for BBVA, it is necessary close several offices and do without a large part of Sabadell’s professionals, which means that it will not benefit from the support of the human resources of the entity that would be absorbed.
And finally, he missed the shot propose a hostile takeover bidthat the Municipality of Sabadell rejects and that it does not seem certain that retailers will accept it, while the work of the Sabadell offices, with the prospect of drastic job cuts, will be inclined to encourage their customers not to accept. In addition, the long execution time of the public purchase offer – eight months – generates instability due to uncertainty, which is significant in the banking sector, uncertainty to which is added the fact that the deadlines can be longer long in their effectiveness, because, of course, at the moment the operation of calculating the execution time has not started, due to the wait that BBVA currently has for the reports of the various regulators and supervisors.
All of this makes it seem like resorting to a hostile takeover bid is a mistake, because it gives the impression that after a friendly deal fails, insisting on the bid may be more about saving the face of BBVA management than defending a potential windfall of the operation for the Basque bank. This leads the entity to be able to be question for the operation, given that there is a high probability that it will fail and that the responsibility of this management will then be even greater.
BBVA’s hostile takeover bid therefore seems to be a mistake, but not because of what the government says, which hastened, as usual, to oppose it. interfere with the free marketnor because of the fact that the resulting bank had its head office in one place or another, but because it is an inefficient and unattractive operation for the shareholders of the bank which plays the role of absorbed potential , both due to the worsening of the risk that they would assume this due to the lack of incentive of the offer in economic terms.
Sabadell shareholders will decide – and BBVA shareholders will know whether or not to hold their board of directors accountable – but a further reduction in banking competition does not seem the most desirable either, which in some regions , like Catalonia, would leave almost the entire market is in the hands of two entities. This doesn’t seem like the best deal for either entity, but they, the market and shareholders will say so.
