San Francisco Frontiers - Spain govt vows to block hostile BBVA bid for rival bank

The move came three days after Sabadell's board of directors rejected a merger proposal from BBVA on the grounds it "significantly undervalues" the bank.

BBVA's proposal values Sabadell, Spain's fourth-largest banking group in terms of capitalisation, at nearly 11.5 billion euros ($12.3 billion).

It would be carried out under the same conditions as the initial approach -- an exchange of one new BBVA share for every 4.83 Sabadell shares, BBVA said.

"This is an extraordinarily attractive offer," BBVA chairman Carlos Torres Vila told a news conference, saying the two lenders were "complementary".

A takeover would create a banking powerhouse capable of competing with Santander -- Spain's leading bank -- as well as with European giants such as HSBC and BNP Paribas.

But Prime Minister Pedro Sanchez's left-wing government denounced the move, as did the regional government of Catalonia where Sabadell was founded and has a strong presence.

- 'Potentially damaging' -

Labour Minister Yolanda Diaz said it was against Spain's "interests" and "would destroy many jobs".

And Economy Minister Carlos Cuerpo said the government would "have the last word when it comes to authorising the operation" which he said would be "potentially damaging".

But Torres Vila said he was convinced "the government and other authorities will come to appreciate the true value of the operation", which would increase "lending capacity" to businesses and individuals.

The takeover bid will need a green light from the European Central Bank as well as the competition authorities in the countries where both lenders operate, including Spain and Britain.

The proposal is now in the hands of Sabadell's shareholders.

On the Madrid stock exchange, shares in Sabadell closed 3.17 percent higher, while BBVA fell by 6.71 percent.

The hostile takeover bid has also raised the hackles of unions, which fear job losses.

This move "could be the first in a new wave of consolidations driven by greed for profits that would increase problems of competition.. and financial exclusion" in parts of the population, warned the CCOO union in a statement.

- Silence from Sabadell -

BBVA, which also operates in Mexico, Argentina and Turkey, is Spain's second-largest banking group in terms of capitalisation, has 74.1 million customers and employs nearly 121,000 people.

Sabadell operates in 14 countries and has nearly 20 million customers and some 19,000 staff.

There was no immediate comment from Sabadell, which had on Monday rejected BBVA's initial offer saying it "significantly undervalues the potential of Banco Sabadell and its standalone growth prospects".

BBVA then wrote to Sabadell saying there was "no room" to improve what it considered to be a generous offer.

BBVA, which was founded in the northern port city of Bilbao, initially tried to merge with Sabadell in November 2020 but the move was rejected by the Catalan bank on the grounds that the offer didn't reflect the real value of its business.

In the ensuing months, Sabadell undertook a major restructuring that resulted in 1,800 redundancies, with BBVA going through a similar process, shedding 3,000 jobs.

Both have since recovered, as has the wider Spanish banking sector, which posted record profits in recent months despite an exceptional windfall tax imposed by Sanchez's government to help households cope with soaring consumer prices.

BBVA posted a 19 percent rise in first-quarter net profits to 2.2 billion euros. Sabadell posted a record net profit of 308 million euros, up 50 percent.

Spain's banking sector underwent a first wave of consolidation during the 2008 global financial crisis, with the collapse of provincial savings banks, which were absorbed by the bigger players.

It underwent further consolidation in 2021 when Caixabank took over Bankia, creating Spain's third-largest banking group, which was followed by Unicaja's acquisition of Liberbank creating Spain's fifth-biggest domestic lender.

B.Johnson--SFF