European Central Bank gives the green light to the BBVA – Banco Sabadell operation

BBVA has received approval (no opposition) from the European Central Bank (ECB) for its offer to Banco Sabadell shareholders. The European regulator’s approval represents „a new and highly significant milestone that further underscores the strength and solvency of this project,” – the bank said. Carlos Torres Vila – BBVA Chairman, highlighted that “the merger of Banco Sabadell and BBVA creates a stronger and more profitable entity , which will have an additional capacity to grant credit to families and businesses of 5 billion euros per year.”

BBVA announced its offer to Banco Sabadell shareholders on May 9. On July 5, BBVA held an Extraordinary General Meeting where shareholders overwhelmingly approved the capital increase necessary to carry out the share swap with Banco Sabadell, with 96% of votes in favor. ECB approval was the next necessary step to move forward with this process. Looking ahead, BBVA’s chairman is confident of „receiving the remaining authorizations according to the planned schedule and moving forward with what he considers the most attractive project in European banking.”

This project is positive for all stakeholders. BBVA shareholders will achieve high returns on investment with limited capital expenditure, while Banco Sabadell shareholders will obtain a very attractive premium (50% of the weighted average share price for the three months prior to April 29, the date before the offer announcement), earnings per share (EPS) 27%¹ higher than that achieved had the bank continued operating independently, and a 16% stake in the resulting entity. Furthermore, all shareholders will benefit from BBVA’s shareholder remuneration policy, which involves distributing between 40% and 50% of profits, and from the bank’s commitment to distribute any excess capital above 12%².

Customers will also have access to a better range of products, and employees to more opportunities for professional growth. The resulting entity will be better positioned to contribute to the economic progress and well-being of Spanish society, not only through increased lending but also through higher tax revenues.

The offer to Banco Sabadell shareholders remains subject to obtaining authorization from the Spanish National Securities Market Commission (CNMV), acceptance of the offer by Banco Sabadell shareholders representing a majority of its share capital, and approval from the Spanish competition authority (CNMC). Once BBVA acquires a stake equal to or greater than 50.01% of Banco Sabadell, it plans to merge the two entities. This merger is subject to the relevant regulatory approvals.

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¹ The offer to Banco Sabadell shareholders remains subject to obtaining authorization from the Spanish National Securities Market Commission (CNMV), acceptance of the offer by Banco Sabadell shareholders representing a majority of its share capital, and approval from the Spanish competition authority (CNMC). Once BBVA acquires a stake equal to or greater than 50.01% of Banco Sabadell, it plans to merge the two entities. This merger is subject to the relevant regulatory approvals.

² Net profit estimate to 2026, according to the consensus of analysts for both entities published by Bloomberg on April 29, 2024, assuming 100% acceptance of the offer by Banco Sabadell shareholders, achievement of all estimated synergies from the transaction, and 100% execution of Banco Sabadell’s share buyback program. Pro-forma Basel IV and subject to regulatory approvals.

³ Authorization by the Ministry of Economy, Trade and Enterprise.