He presents to the shareholders of the Catalan entity the same offer that he presented for the friendly merger

The board of directors of BBVA has decided to formulate a hostile takeover bid (OPA) for 100% of the shares of Banco Sabadell after this entity rejected a friendly proposal, according to the statement sent this Thursday to the Commission National Securities Market (CNMV).

BBVA offers Sabadell shareholders an exchange of one new title for every 4.83 of Sabadell, the same offer that it had proposed last week to the board of directors of the Catalan entity, so the 30% premium on the closing price of both entities on April 29; 42% on the weighted average prices of the last month; and 50% on the weighted average prices of the last three months.

In addition, Banco Sabadell shareholders will have a 16% stake in the resulting entity. The equivalent price of the cash consideration is 2.12 euros per share of the entity of Catalan origin.

BBVA plans to present the request for authorization of the takeover bid to the CNMV, together with an explanatory project and other complementary documents, in "the first half" of a maximum period of one month from the date on which the decision has been made public. to formulate the offer.

The BBVA board also agreed to call its general meeting of shareholders to decide on the issuance of new shares in the amount necessary to fully cover the exchange.

Thus, the offer is conditional on obtaining more than 50.01% of Sabadell's share capital, the approval of the capital increase by the BBVA shareholders meeting, and the approval of the National Markets and Competition Commission (CNMC) and the UK Prudential Regulation Authority.

BBVA expects that the closing of the operation will take place in a period of between six and eight months, once it receives the necessary authorizations. JP Morgan, UBS Europe, Rothschild

"We present Banco Sabadell shareholders with an extraordinarily attractive offer to create an entity with greater scale in one of our most important markets," said the president of BBVA, Carlos Torres Vila. "Together we will have a greater positive impact in the territories in which we operate, with an additional credit granting capacity of 5,000 million euros per year in Spain," he added.

The bank believes that the merger would have "very positive" financial impacts thanks to "relevant synergies" and the "complementarity and excellence" of both entities. After the closing of the operation, BBVA would be the second financial entity in Spain - behind CaixaBank -, which is one of the group's most relevant markets and whose future prospects are "good." BBVA's profitability in Spain at the end of December 2023 was 19%.

With data at the end of 2023, the resulting entity would reach a credit investment of 265,000 million euros and a market share in loans close to 22% in the Spanish market (13.8% BBVA and 8.1% Banco Sabadell).

"They are two very complementary banks, both due to their geographical diversification and their strengths in customer segments. In Spain, Banco Sabadell is a leader in SMEs, with a share of 12.7%, versus 11.5% for BBVA ; while BBVA is stronger in retail banking, with a share of 14.7%, compared to 6.3% for Banco Sabadell," says the entity chaired by Carlos Torres.

BBVA ENSURES THAT IT WILL MAINTAIN A PAY-OUT OF BETWEEN 40% AND 50%

BBVA also anticipates that it will maintain its current shareholder remuneration policy, with a 'pay out' of between 40% and 50%, combining cash dividends and buybacks, and its commitment to distribute any excess capital above 12 %.

On the other hand, the entity defends that it represents a "clear generation of value" also for BBVA shareholders. Thus, he maintains that the transaction will be positive for earnings per share (EPS) "from the first year" after the subsequent merger of both entities, with an improvement of around 3.5%, once the savings associated with the merger are produced. same, which is estimated at approximately 850 million euros before taxes. Additionally, the tangible book value per share increases around 1% on the date of the merger.

In addition, he states that it will mean a "high return on investment", with an incremental ROIC close to 20% for BBVA shareholders. It would have a "limited" impact on the CET1 capital ratio, of approximately 30 basis points, which would be around 1,450 million euros for restructuring expenses, without including the impact from the breakdown of joint venture agreements.

INTEREST GROUPS

With respect to other interest groups, BBVA points out that clients would have a "unique" value proposition due to the complementarity of the franchises, the greater product offering and the bank's global reach, while employees could take advantage of "new professional opportunities" by being able to grow in a global entity.

In this sense, BBVA's intention is to "preserve the best talent" of both entities and that all decisions to integrate employees are guided by principles of "professional competence and merit, without adopting "traumatic measures and with all guarantees." "In addition, it is expected that technological integration will take between 12 and 18 months."

The resulting entity would be "stronger and more profitable", which would translate, according to the bank, into more financing for companies and families and into a "greater contribution to public coffers via taxes."

"All interest groups will benefit from this operation," said BBVA CEO Onur Genç. "Banco Sabadell has done an excellent job, with admirable progress in recent years, and now its shareholders can join an entity with a combination of growth and profitability unparalleled in Europe," he added.

REACTION OF BANCO SABADELL

For its part, Banco Sabadell has reiterated its rejection of this hostile takeover bid formulated by BBVA, and has referred to its communication on Monday, when it ruled out the operation on the grounds that it "significantly undervalues" the Sabadell project and its growth prospects. as an independent entity.

"The board has full confidence in Banco Sabadell's growth strategy and its financial objectives and is of the opinion that its strategy as an independent entity will generate greater value for its shareholders," highlighted the entity, whose highest governing body is met on Monday to evaluate BBVA's proposal, which he described as "unsolicited, indicative and conditional."

After analyzing the proposal "in detail", Monday's council, which was also attended by representatives of Goldman Sachs and Morgan Stanley as financial advisors and Uría Menéndez Abogados as legal advisor, concluded that BBVA's offer "does not satisfy" Sabadell's interest. and its shareholders and, therefore, rejected BBVA's proposal.

This is not the first time that both banks have had this operation on the table. Already in 2020, BBVA and Sabadell studied a merger, although they finally ended up rejecting it because they did not reach an agreement on the share exchange ratio.