The keys to BBVA’s defeat in its takeover bid for Sabadell

The Spanish banking giant BBVA’s attempt to grasp control of Banco Sabadell ended in failure after 17 months of struggle, yet its own shares in the U.S. rose 6.7%. The deal would have created one of Europe’s largest lenders by assets.

What happened?

The hostile €17 billion ($19.96 billion) takeover bid launched by BBVA against the smaller Banco Sabadell in April 2024 only convinced 25.33% of Sabadell shareholders, short of the minimum 30% of voting rights required to go ahead with the operation, Spain’s market regulator CNMV said in a statement on Thursday. “As a result, the public offer has had a negative outcome” and “is rendered null and void.”

Founded in Spain’s northern Basque region, BBVA is now the country’s second-largest bank and it has a significant presence in Latin America as well as other global markets. Securing 50% of shares would have given it outright control over the Catalonia-based Sabadell, Spain’s fourth-largest bank. Surpassing the 30% threshold would have allowed the process to move forward and even opened the door to a second offer. Failure to do so automatically renders the takeover bid void and forces BBVA to refrain from any further attempts for at least a year.

How did things get to this point?

The fight between BBVA and Sabadell did not begin with this takeover bid. The Spanish banking giant had already attempted a merger in 2020, a move that failed as well. Following that refusal, BBVA decided to launch a hostile takeover bid seeking to gain control of the Catalan bank.

During the 17 months of dispute, Sabadell defended its independence with the support of its minority shareholders and part of the Catalan business community. Sabadell leaders had recommended that shareholders reject the offer.

Immediate reaction

As soon as the result of the vote was known, BBVA announced that it would resume payouts to its shareholders and conduct share buybacks worth €1 billion during October and November. “At BBVA, we look towards the future with confidence and enthusiasm,” said BBVA chairman Carlos Torres Vila in a statement.

Paradoxically, BBVA shares in the United States celebrated the failure of the takeover bid. The news sent ADRs (American Depositary Receipts, the assets under which the bank is listed on Wall Street) up 10%, reaching a high of $19.99 per share, to close the trading day up 6.7% at $19.48. These gains underscore that the operation that BBVA was so keen to pursue was difficult to justify financially in the eyes of the market.

What now?

The “banking war” between the two Spanish giants appears to have ended, at least for now, with a clear winner that had fought to preserve its independence. BBVA is closing the chapter, and its roadmap will once again focus on organic growth and profitability. Sabadell, for its part, emerges from the fight with a stronger reputation.

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