Spain’s second-largest lender, BBVA, has formally launched its €14.8 billion ($17.34 billion) hostile takeover bid for smaller rival Sabadell, setting in motion one of Europe’s most closely watched banking battles.
Reuters reports that the move comes 16 months after BBVA first went hostile, triggering a lengthy competition review. Analysts note that while the bank has stuck to its original terms, Sabadell’s surging share price has already made the offer look less attractive to shareholders.
BBVA’s offer seeks to combine the two lenders into Spain’s second-largest bank, with domestic assets worth around €1 trillion — behind only Caixabank. Sabadell shareholders now have until October 7 to tender their shares, with results due by October 14.
But a sticking point has emerged: Sabadell’s shares have outperformed BBVA’s since April 2024, climbing above the value of the original offer. BBVA said on Friday it is not planning to revise the bid, though legally it could do so until five days before the deadline.
When BBVA first pitched the deal, it offered a 30% premium over Sabadell’s April 29, 2024, closing price. That premium has now eroded into a negative differential of around 9%.
“Retail investors in particular are unlikely to view an offer below market price as attractive,” Barclays analysts said on Monday.
Still, Barclays noted that by sticking to its original terms, BBVA has preserved the financial appeal of the deal, which would expand its footprint in Spain.
Both banks’ shares edged higher by around 0.6% by 1221 GMT on Monday, reflecting cautious market anticipation that BBVA might eventually sweeten the terms.
Pressure to Raise the Offer
Spanish broker JB Capital believes BBVA “will need to top up the bid if it wants to reach the targeted 50.01% acceptance.” According to its calculations, the bank could raise its offer by as much as 34% while still preserving about 85% of the €900 million in targeted synergies.
Exane BNP Paribas echoed this sentiment, warning that “under the current terms it would be quite difficult” to win over Sabadell’s shareholders, half of whom are retail investors.
Shareholding in Sabadell is highly fragmented. Its 20 largest shareholders are mostly international institutions, with BlackRock (BLK.N) as the biggest, holding about 7%, according to Spain’s financial supervisor.
Jefferies analysts also suggested that BBVA could improve the terms, estimating the discount in share prices at around €1.5 billion.
Regulatory Dynamics and Government Resistance
While BBVA is targeting at least 50.01% of Sabadell’s shares, it has recently secured U.S. regulatory approval to lower the acceptance threshold to 30%. That flexibility may help the bank advance the deal without a majority takeover.
However, the Spanish government has taken an unusual stance by blocking a full merger for at least three years. The state has argued that banking consolidation must not undermine competition or customer access, making BBVA’s hostile move more politically sensitive.
Alantra, a Spanish broker, suggested BBVA’s strategy may be leaning toward partial control rather than full integration, noting that “with delayed synergies, BBVA cannot afford a large premium to convince retail investors.”
Europe’s Banking Consolidation Puzzle
BBVA’s pursuit of Sabadell fits a broader pattern of European banking consolidation, where scale is increasingly seen as essential to withstand margin pressures, digital competition, and stricter capital rules.
For instance, in Italy, Intesa Sanpaolo’s successful takeover of UBI Banca in 2020 created a giant with stronger domestic dominance despite initial shareholder resistance. In France, Crédit Agricole and Société Générale have both been linked to merger speculation as they seek efficiency in a low-interest environment. Germany, by contrast, has struggled with stalled merger talks between Deutsche Bank and Commerzbank, reflecting political hesitation similar to Spain’s.
In that light, BBVA’s persistence mirrors a regional trend: large incumbents trying to absorb smaller rivals to reach scale, even when politics and shareholder sentiment complicate the process. But unlike Italy, where regulators supported consolidation, BBVA faces a tougher balancing act given Madrid’s open opposition and Sabadell’s rising market valuation.
The outcome of this bid could reshape Spain’s banking sector for years. Analysts believe that if BBVA succeeds — even at the lower 30% threshold — it would gain enough influence over Sabadell to tighten its grip on the domestic market, pressuring Caixabank and Santander to defend their turf. Caixabank, already the largest by assets, might have to accelerate digital investments or pursue its own merger opportunities to avoid being outflanked.
Santander, with its heavier reliance on international markets, may not feel the immediate squeeze, but analysts say a stronger BBVA at home could force it to rethink its balance between Spain and Latin America.
For Sabadell, rejecting BBVA outright could bring short-term independence but may leave it vulnerable in a market trending toward consolidation. Rising technology costs, tighter regulation, and growing competition from fintechs mean that smaller banks like Sabadell risk being squeezed without a bigger partner.
Regionally, the clash could set a precedent. Some analysts believe that if BBVA overcomes government resistance and pulls off even a partial control deal, it could embolden similar consolidation attempts elsewhere in Europe, where banks face the same pressures of low profitability, high capital requirements, and the need for costly digital transformation.
But if BBVA fails, it might signal that Europe’s political constraints remain stronger than market forces, potentially chilling merger activity and leaving banks fragmented compared to their American and Chinese peers.
