Banco Sabadell rejected the merger offer with BBVA – Banking and Financial Services

The Board of Directors of Banco Sabadell on Monday rejected the merger proposal launched by BBVA last week, the financial institution said in a statement to the National Securities Market Commission (CNMV).

“The Board of Directors considers that the proposal significantly underestimates the value of Banco Sabadell’s enterprise and its growth prospects as an independent entity,” the document states.

The bank's management, consisting of 14 members and headed by Josep Ollio, met today to evaluate the Basque competitor's proposal. They added, “The Board of Directors has full confidence in Banco Sabadell’s growth strategy and financial objectives and believes that Banco Sabadell’s strategy as an independent entity will generate greater value for its shareholders.” This is the second time that Sabadell has rejected BBVA's advances. The first attempt took place in 2020.

On April 30, last Tuesday, BBVA confirmed that it had sent a letter to Sabadell to begin talks on a possible merger, sending the Catalan bank's shares soaring that day.

The proposal estimated the value of Sabadell at approximately 11.5 billion euros. BBVA intends to implement the transaction by paying a new share representing part of the capital of the Basque Bank, for every 4.83 shares in Sabadell. After accounting for this ratio, and taking into account the two institutions' closing prices on April 29, this represents a premium of 30% and a value 4.5 times higher than the merger proposed four years ago.

However, one of the reasons given by the Catalan bank for rejecting the proposal was “the significant decline and volatility in the BBVA share price in recent days, which generates further uncertainty about the value of the proposal.” The value of the corporation's securities has decreased by 9.72% since the announcement of the offer.

BBVA also offered three positions on the banking organization's board of directors and vice president. According to the proposed exchange, current Sabadell shareholders would end up owning 16% of BBVA shares.

The Basque Bank has also ensured that one of the new entity's operational headquarters will be in Catalonia, allowing it to maintain Sabadell's regional DNA.