BBVA's Hostile Bid for Sabadell: Strategic Merger or Overvalued Gamble?

The proposed 14.9 billion euro hostile takeover of Banco Sabadell by BBVA has ignited a fierce debate among investors and analysts. On one hand, the merger promises to create Spain’s second-largest bank by assets, with synergies of 900 million euros and a 25% boost in earnings per share for Sabadell shareholders [1]. On the other, regulatory constraints, political interference, and Sabadell’s aggressive defense tactics have cast doubt on the deal’s feasibility and value. This analysis examines whether the bid is a calculated strategic move or a high-stakes gamble with uncertain returns.

The Value Proposition: Synergies and Strategic Fit

BBVA’s offer—a mix of one newly issued share and €0.70 in cash for every 5.5483 Sabadell shares—reflects its confidence in the merger’s long-term benefits. The bank claims the deal will deliver a 3.5% earnings per share accretion and a 20% return on invested capital, while maintaining a minimal capital impact of 30 basis points [4]. These figures are bolstered by BBVA’s robust first-half 2025 performance, which saw a record €5.45 billion net attributable profit, driven by its Corporate & Investment Banking division [3].

Strategically, the merger aims to combine BBVA’s retail banking expertise with Sabadell’s strength in SME lending, particularly in Catalonia and Valencia. According to BBVA’s chairman, Carlos Torres Vila, the combined entity would generate more value than the two banks operating independently [3]. However, the projected synergies—initially estimated at €850 million annually—have been delayed until 2029 due to regulatory constraints, such as the Spanish government’s mandate to keep the two banks as separate legal entities for at least three years [1].

Risks: Regulatory Hurdles and Political Interference

The Spanish government’s intervention has become the most significant risk to the deal. While the antitrust regulator (CNMC) approved the merger in April 2025, the government imposed stringent conditions, including maintaining separate management structures and prohibiting layoffs tied to the acquisition [1]. These measures undermine BBVA’s cost-saving ambitions and complicate integration. As noted by analysts at S&P Global, the government’s focus on “competition, employment, and territorial cohesion” reflects a broader trend of protectionist policies that challenge the EU’s vision for a unified banking market [1].

Further complicating matters, the European Commission has hinted at potential legal challenges to Spain’s handling of the deal, citing alleged breaches of capital movement regulations [3]. This adds another layer of uncertainty, with BBVA’s share price already showing signs of vulnerability amid regulatory delays.

Sabadell’s Defense and Market Reactions

Banco Sabadell has not passively accepted the bid. The bank has sold its UK subsidiary TSB to Santander for €3.1 billion to strengthen its balance sheet and announced a record €0.50 per share dividend, effectively reducing its appeal as a takeover target [1]. These moves have bolstered shareholder confidence: Sabadell’s stock price rose 16.25% between June 14 and September 5, 2025 [3].

Meanwhile, BBVA’s bid faces a high bar for success. The offer requires acceptance from at least 50% of Sabadell’s shareholders, though the bank has secured U.S. SEC approval to lower the threshold to 30% if necessary [3]. This flexibility may prove critical, but it also underscores the bid’s precariousness.

A Gamble with Mixed Odds

The merger’s value proposition hinges on BBVA’s ability to navigate regulatory and political challenges while realizing its synergy targets. While the deal could enhance BBVA’s scale and profitability, the three-year separation mandate and EU scrutiny significantly delay tangible benefits. For Sabadell shareholders, the immediate appeal of a 21% dividend increase and a resilient stock price may outweigh the long-term promise of the BBVA offer [3].

Conclusion

BBVA’s bid for Sabadell is a high-stakes bet on long-term strategic gains, but the path to success is fraught with regulatory and political risks. While the merger could create a more competitive banking giant, the immediate costs—both financial and operational—suggest it may be an overvalued gamble. Investors must weigh BBVA’s optimistic projections against the reality of Spain’s interventionist stance and the resilience of Sabadell’s defenses.

Source:
[1] BBVA gets greenlight to buy up Banco Sabadell, https://www.euronews.com/business/2025/09/05/spanish-megabank-in-the-making-bbva-gets-greenlight-to-buy-up-banco-sabadell
[2] BBVA-Sabadell merger faces at least three-year integration delay, https://www.retailbankerinternational.com/news/bbva-sabadell-merger-integration-delay/
[3] BBVA maintains takeover bid for Banco Sabadell despite TSB sale, https://www.investing.com/news/company-news/bbva-maintains-takeover-bid-for-banco-sabadell-despite-tsb-sale-93CH-4183513
[4] Shareholders Report 2Q25 - Accionistas e Inversiones en..., https://shareholdersandinvestors.bbva.com/informes/shareholders-report-2q25/