Spanish Regulators to Decide Fate of BBVA’s 12.28 Billion Euro Sabadell Bid

BBVA’s ambitious takeover attempt of smaller Spanish rival Sabadell, first announced 10 months ago, is approaching a crucial milestone. According to Reuters, Spain’s competition regulator is expected to announce the results of its review as early as March, determining the next steps in what has become a high-stakes corporate battle.

BBVA’s unexpected move on Sabadell in 2023 was seen by some industry leaders as a potential catalyst for increased dealmaking across European banks. However, the bid has also underscored the political and regulatory hurdles that such transactions face.

Regulatory Scrutiny and Potential Conditions

BBVA’s 12.28 billion euro bid turned hostile in May after Sabadell’s board rejected the offer. Since then, the competition regulator has been assessing the implications of the proposed acquisition. As per Reuters, the regulator extended its review period in November, stating that it needed more time before making a decision on whether to approve the deal outright or impose conditions.

Should the regulator find BBVA’s proposed commitments insufficient, it has the authority to mandate additional measures. In a worst-case scenario for BBVA, the regulator could ultimately block the deal. However, analysts cited by Reuters believe BBVA is likely to accept the necessary conditions and push ahead with its takeover plan, despite concerns about prolonged negotiations.

Last month, BBVA Chairman Carlos Torres, the main proponent of the deal, expressed confidence that regulators would approve the acquisition with “acceptable remedies.” These could include commitments such as keeping branches open in areas where alternatives are scarce. However, Sabadell remains unconvinced, arguing that more substantial measures, such as asset disposals, are necessary to address competition concerns.

Related: Spain’s Financial Regulator Awaits Antitrust Decision on BBVA’s Hostile Bid for Sabadell

Further Approvals and Political Challenges

Even if the competition authority clears the acquisition, two more regulatory bodies—the financial markets supervisor and the Spanish government—must approve the deal before BBVA can make a formal offer. The markets supervisor has indicated it will await decisions from both the government and the antitrust regulator before taking a stance.

Political opposition remains a significant hurdle. According to Reuters, Prime Minister Pedro Sanchez’s government has voiced concerns about the impact on employment and banking customers. In a move seen by analysts as an attempt to garner political support against the merger, Sabadell recently relocated its legal headquarters back to Catalonia, the region where it has deep historical roots.

Although competition laws limit the government’s direct ability to intervene, it does have the option to escalate the matter to a cabinet review. Per Reuters, Spain’s economy ministry has 15 business days to trigger this process if the antitrust regulator sets conditions, after which the government has one month to formally oppose the deal—referred to informally as a ‘phase 3 review.’

The Uncertain Future of the BBVA-Sabadell Merger

The takeover’s ultimate outcome remains uncertain. Even if BBVA secures regulatory approval, the government may still have the power to block a full-scale merger between the two banks. In such a scenario, BBVA could be forced to keep Sabadell as a separate entity, at least temporarily.

While this is not BBVA’s preferred strategy, banking sources noted that the company could still achieve significant cost savings through integration over time.

Source: Reuters