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Spain’s competition authority has greenlit BBVA’s €11 billion aggressive bid for its competitor Sabadell, clearing the path for the government to make the final decision in the ongoing takeover struggle.
The CNMC, Spain’s antitrust body, announced on Wednesday that it had approved the acquisition, but noted that BBVA must adhere to several requirements, such as keeping branches operational in certain regions.
Keeping branches was one of the assurances BBVA provided during the review process to address the regulator’s worries. The authority stated that these proposals were “adequate, sufficient, and proportionate to tackle the competition issues this merger could cause in the markets impacted.”
If BBVA and Sabadell, which has origins in Catalonia, join forces, it would surpass Santander, becoming the second-largest player in Spain’s lending market.
This bid, potentially marking the biggest bank takeover in Europe in years, has faced strong resistance from Sabadell’s management and the Socialist-led government of Spain.
In an article for the Financial Times earlier this month, Sabadell’s CEO, César González-Bueno, highlighted the “unprecedented opposition in Spain” towards the deal, which he claimed stemmed from a desire to protect competition and promote growth, arguing that a merger would disadvantage local businesses.
Spain’s economy minister, Carlos Cuerpo, expressed prior concerns that the merger might diminish competition within the banking sector and create financial stability risks by leaving Spain with just three major banks.
The government now has 15 days to decide if it will review the bid. If it chooses to proceed, it has a month to reach a conclusion. While the government cannot block BBVA from purchasing Sabadell’s shares, it holds the authority to veto a legal merger of both banks.
A takeover by BBVA, which generates most of its profits in Mexico, would strengthen its foothold in the domestic market. The lender finds Sabadell’s base of small and medium-sized clients particularly appealing.
Previously, Sabadell’s board turned down a friendly offer from BBVA last May before BBVA approached again with an aggressive bid on the same terms.
“This approval isn’t final,” stated the CNMC on Wednesday, adding that Cuerpo would decide “whether to bring it to the council of ministers, which may consider the transaction based on broader public interest criteria beyond just competition concerns.”
BBVA’s chairman, Carlos Torres Vila, remarked: “The merger with Banco Sabadell is a growth initiative that would increase our lending capacity to businesses and households by an additional €5 billion annually.”
He expressed that the bank’s commitments are aimed at “financial inclusion, regional development, lending to SMEs and self-employed individuals, and maintaining competitiveness.”
Sabadell voiced its discontent with the CNMC on Wednesday, criticizing the methodology employed by the authority during its examination.
The bank argued that this approach did not enable a “thorough evaluation of the potential impact of consolidation” on small and medium-sized companies.
In the coming weeks, the lender plans to present a new strategic roadmap that will outline its future as a “standalone entity,” providing shareholders the opportunity to “compare the value creation potential of the Catalan bank with what BBVA proposes.”
