BBVA's Acquisition Bid for Sabadell Faces Regulatory Scrutiny
BBVA's (BME:BBVA) attempt to acquire rival Spanish bank Sabadell has encountered a significant regulatory hurdle as Spain's National Markets and Competition Commission (CNMC) has initiated a detailed examination of the acquisition proposal. This "phase 2" process allows the competition authority at least three additional months to assess the offer. The proposal has faced concerns regarding its impact on competition in the lending sector, particularly for small and medium-sized enterprises, alongside political opposition.
The CNMC's decision to extend the review period is seen as a setback for BBVA, Spain's second-largest bank, which hoped for a swift approval with minimal conditions. The extended examination increases the likelihood that the CNMC will demand more comprehensive solutions from BBVA, adding to the bank's uncertainties.
BBVA's interest in acquiring Sabadell is partly motivated by a strategy to shift its portfolio away from emerging markets. However, the bank's shares fell by approximately 7% following Donald Trump's election victory in the United States. This raised concerns about potential protectionist measures that could impact BBVA's significant profits from Mexico. Since the announcement of the offer in April, BBVA's shares have dropped by 18%, reducing the value of its total share offer for Sabadell from the initial €12.28 billion to €9.83 billion.
Despite the challenges, some analysts remain optimistic about the likelihood of a deal, citing BBVA's strong positions in Mexico and Turkey. Market observations indicate that BBVA and Sabadell's shares are still moving together, suggesting that investors still see a reasonable chance of the acquisition occurring.
BBVA CEO Onur Genç has publicly stated that the bank expects "non-structural" solutions from the CNMC. This expectation reflects past precedent and the fact that the combined entity would not become Spain's largest lending institution. Genç also noted that BBVA might abandon the agreement if imposed conditions are deemed "unacceptable."
The CNMC's final decision will also be critical for Spain's market regulator CNMV, which must approve BBVA's offer before it can present it to Sabadell's shareholders. As of April 29, the premium BBVA offered based on Sabadell's share price has decreased from about 30% to nearly 5%. This reduction diminishes the appeal of the proposal, especially for individual investors, who make up roughly half of Sabadell's shareholder base.
Despite speculation from some analysts that an improvement might be necessary, BBVA executives have expressed that there are no intentions to increase the offer. The current focus now shifts to the ongoing CNMC review and the potential impact of the political climate in the U.S. on BBVA's operations in Mexico.