10/05/2024
Published in
The Conversation
Álvaro Bañón
Professor at School of Economics
BBVA has been pursuing the acquisition of Banco Sabadell for several years. It tried to do so in 2020, and then it did not come to fruition when Sabadell's board of directors refused committee because they considered the price offered to be low. It has tried again now and, after several weeks of negotiations between the boards of directors of both entities(which have not come to fruition), BBVA has decided to take the plunge and present a hostile takeover bid.
What exactly is a hostile takeover bid?
PTB is the acronym for takeover bid. It means that someone, a third party (here BBVA), makes an offer to shareholders for their shares of a business (in this case, Banco Sabadell). It is made when a listed business has a large number of minority shareholders.
A takeover bid can be friendly, when it has the favorable opinion of the management committee , which has negotiated a price it believes to be advantageous, or it can be hostile, as is now the case, when the management committee is not in agreement with what the buyer, BBVA, is offering agreement.
The hostile takeover bid consists of BBVA approaching Sabadell's shareholders with an offer for their shares and doing so by bypassing Sabadell's committee board of directors.
But can you buy a business against your management committee ?
Yes, depending on the issue of shares controlled by those members of committee of administration. In the case of Sabadell, they control very few shares because its shareholding is very fragmented. Sabadell does not have a shareholder of reference letter like the Botín family at Santander.
After the exits, years ago, of Catalan investor families, 53 % of its shares are in the hands of large investment funds and the remaining 47 % of retail investors (small shareholders who have bought them on the stock exchange). The largest shareholder among the funds is the giant BlackRock, which holds 3.9 % of the shares.
What does BBVA offer shareholders?
To begin with, BBVA is not offering Banco Sabadell shareholders hard cash, but wants to pay them with BBVA shares, shares that will arise from a future capital increase.
Specifically, it offers 1 new BBVA share for every 4.83 Sabadell shares held by each investor. This, which is quite common, adds uncertainty to the potential seller, since he is not offered money, but rather to get on another boat that he had not chosen in principle. And if he then wants to sell the shares he is given in exchange, he does not know how much he will earn. Uncertainty.
And who can sell their shares?
Any Sabadell shareholder can sell his shares to BBVA, whether he is an investment fund or an individual shareholder, and the conditions must be the same for all.
BBVA has set the condition to pay the shareholders to acquire 50.01% of the shareholding. In other words, BBVA is not interested in holding 30% of the shares, for example, because it wants to integrate Sabadell into BBVA.
Therefore, if, for example, 45% of Sabadell's current shareholders say they want to sell, they will not be able to do so because the minimum set by BBVA is 50.01%.
Sabadell's management committee did not find the conditions sufficiently attractive and maintains its position against BBVA's offer. We will see how it all turns out, because the offer has already been formally made and each shareholder is free.
What can the operation mean for stakeholders?
In the event that the takeover bid is successful, for some of Sabadell's workers this operation will probably imply a transcript de regulación de employment (ERE), probably with voluntary departures in better or worse economic conditions. Purchases are made to acquire the business and then eliminate duplicities to reduce costs.
For the rest of banking customers (whether or not they are customers of the banks involved), the success of this takeover will mean a reduction in the range of banking services offered and a lower skill. And that, in principle, is always negative.
In an already highly concentrated market such as the Spanish one, this purchase would mean even more concentration. Specifically, in terms of bank deposits, it would mean adding to BBVA's 13.7% the 7.6% of Sabadell, so that CaixaBank, Santander and BBVA would control 65% of the deposit market. This would not be good for savers, who would see how few first-rate institutions compete for their money.
In terms of loans, the concentration would be very similar, so that loan offers would be reduced and, with fewer skill, conditions for customers would probably worsen.
The role of regulatory agencies
For the benefit of the consumer, the job of both the government and the National Markets Commission and skill is to ensure that there are sufficient competitors in all markets. This is a controversial case and, if the takeover bid were successful, the authorities could reject the subsequent merger, or force BBVA to divest businesses in favor of skill.