Spanish banking sector about to be reshaped? BBVA.US finally raised its offer by 10% to acquire Sabadell.

Spanish bank BBVA.US is set to increase its bid to acquire Spanish bank Banco Sabadell SA by about 10%, in an attempt to convince investors of this smaller competitor to sell their shares. According to a statement released on Monday, BBVA's latest offer values Banco Sabadell at approximately 17 billion euros (around 20 billion dollars), a premium of about 1.6% over its closing market value last Friday. This adjustment marks a change in attitude from BBVA's management who had insisted for months that there was "no need or intention to increase the bid." Despite Banco Sabadell's decision to sell its UK subsidiary TSB to Banco Santander S.A. Sponsored ADR and distribute a special dividend of 2.5 billion euros, BBVA had to raise its bid. Previously, Banco Sabadell's board had rejected BBVA's initial bid for 2024 citing "undervalued potential," and its management openly opposed the deal; third-largest shareholder David Martinez even stated this month that the strategic move was correct but the current bid was "unworkable". BBVA's statement on Monday emphasized that the board had "agreed to forgo further price increases or extend the acceptance period," essentially ruling out the possibility of another raise. On that day's trading session, Banco Sabadell's stock fell by 4.6% and BBVA's stock dropped by 2%. Royal Bank of Canada analyst Benjamin Thomas believed that the revised bid is "fair and not unexpected, with sufficient attractiveness," and expected that most investors would accept it. Previously, BBVA had proposed a plan to offer 1 new ordinary share plus 0.7 euros in cash for every 5.5483 shares of Banco Sabadell, valuing Banco Sabadell at approximately 15.5 billion euros, a discount of about 8% compared to its market value of 16.8 billion euros at the time. BBVA Chairman Carlos Torres stated that the new bid "combines historical valuations with the enormous value opportunities brought by the integration." It is worth noting that a full stock acquisition offer can prevent Spanish tax resident shareholders from paying capital gains tax in the transaction. Banco Sabadell had previously pointed out that most shareholders would face a tax bill higher than the cash offer from BBVA. Renta 4 analyst Nuria lvarez believed that this adjustment "significantly improves the attractiveness of the offer by eliminating the tax obligations for shareholders". On August 6, Banco Sabadell's shareholders overwhelmingly supported the plan to sell TSB to Santander with 99.6%, becoming one of the most decisive votes in years. Previously, in June, the Spanish government informed BBVA that if the acquisition were to proceed, they would not be allowed to integrate Banco Sabadell for several years, limiting cost synergies - which are usually the core logic of such transactions. Despite these restrictions, BBVA continues to push forward, stating that the deal "will create value for both sets of shareholders, although some expected synergies may be delayed due to restrictions," and maintaining the acquisition offer unchanged after the TSB sale. If the merger is completed, it will create a Spanish banking giant: BBVA currently ranks as the second-largest asset bank in Spain, while Banco Sabadell ranks fourth, and the combined market share would significantly increase.