BBVA’s Hostile Takeover of Sabadell: A Strategic Move or Shareholder Gamble?

The proposed hostile takeover of Banco Sabadell by BBVA, valued at €14.9 billion, has ignited a heated debate among investors, regulators, and industry analysts. While BBVA frames the deal as a strategic imperative to consolidate Spain’s banking sector and unlock €900 million in annual cost savings, critics argue that regulatory constraints, integration complexities, and shareholder resistance could undermine its long-term value creation potential. This analysis evaluates the financial rationale and risks of the merger, drawing on recent data and expert insights.

Strategic Rationale: Scale, Synergies, and Market Position

BBVA’s bid for Sabadell is rooted in the pursuit of scale and operational efficiency. The merger aims to create a banking giant with a stronger footprint in Spain and enhanced cross-border capabilities, particularly in digital transformation and customer-centric services. According to BBVA CEO Onur Genç, the integration would boost earnings per share (EPS) for both sets of shareholders and improve operational efficiency through technological synergies [1].

Financially, the deal appears compelling. BBVA reported a 18% year-on-year increase in net profit for Q4 2024, reaching €2.43 billion, while Sabadell’s net profit surged 75% to €532 million, driven by its TSB subsidiary [2]. These strong performance metrics underscore the combined entity’s potential to leverage economies of scale. Additionally, BBVA’s CET1 capital ratio remains robust, with its 2025 stress test results indicating resilience even under adverse scenarios [3].

The projected €900 million in annual cost savings by 2029 is a key driver of the merger’s value proposition. However, regulatory conditions imposed by the Spanish government have delayed the realization of these synergies. The requirement for the banks to operate independently for at least three years pushes the full benefits to 2029, complicating near-term returns [4].

Risks and Challenges: Regulatory Hurdles and Shareholder Resistance

Despite the strategic logic, the merger faces significant headwinds. The Spanish government’s intervention reflects broader European concerns about antitrust issues and market concentration. As a result, BBVA and Sabadell must maintain separate operations until 2028, increasing integration costs and resource demands [5]. BBVA has acknowledged that the process could be “complex and resource-intensive,” with potential overruns in projected synergy timelines [6].

Sabadell’s board has also rejected the offer, arguing it undervalues the bank and exposes shareholders to execution risks. Chairman Josep Oliu emphasized Sabadell’s standalone profitability, including a 37% year-on-year net profit increase in 2024, and warned of potential losses in flexibility and customer trust post-merger [7]. Shareholders now have until October 7 to tender their shares, with the dispersed ownership structure adding uncertainty to the bid’s success [8].

Market Reactions and Comparative Benchmarks

The market’s muted response to the deal—BBVA’s shares rose 0.4%, while Sabadell’s climbed 0.37%—suggests skepticism about the merger’s immediate value [9]. This contrasts with broader European banking M&A trends, where deals like UniCredit’s expansion and Santander’s TSB acquisition have shown mixed outcomes. For instance, Santander’s TSB acquisition, though initially controversial, eventually enhanced its UK market position through cost synergies [10].

BBVA’s offer includes a 30% premium over Sabadell’s April 2024 share price, but analysts question whether this compensates for the delayed synergies. The offer grants Sabadell shareholders a 13.6% stake in BBVA, which could benefit from the latter’s projected 25% EPS growth [11]. However, the three-year operational separation may erode confidence in the merger’s long-term viability.

Conclusion: A Calculated Gamble?

The BBVA-Sabadell merger embodies both strategic ambition and execution risk. While the deal’s scale and projected synergies align with European banking consolidation trends, regulatory delays and integration challenges could deter value realization. For BBVA, the merger represents a high-stakes bet on long-term growth, contingent on navigating political and operational hurdles. For Sabadell shareholders, the decision to accept the bid hinges on whether the 13.6% stake in BBVA justifies the loss of standalone potential.

Source:
[1] BBVA CEO Onur Genç, The integration of BBVA and Sabadell is a transaction for growth [https://www.bbva.com/en/economy-and-finance/the-integration-of-bbva-and-sabadell-is-a-transaction-for-growth/]
[2] Reuters, BBVA’s Q4 net profit up 18% vs. 2023 [https://www.reuters.com/business/finance/bbvas-q4-net-profit-up-18-compared-same-period-2023-2025-01-30/]
[3] BBVA Shareholders Report 2Q25 [https://shareholdersandinvestors.bbva.com/informes/shareholders-report-2q25/]
[4] Investing.com, BBVA reassesses Sabadell takeover amid government conditions [https://www.investing.com/news/stock-market-news/bbva-reassesses-sabadell-takeover-amid-government-conditions-93CH-4178886]
[5] Bloomberg, BBVA adjusts Sabadell offer price following dividend payment [https://www.bloomberg.com/news/articles/2025-09-01/bbva-adjusts-sabadell-offer-price-following-dividend-payment]
[6] Reuters, BBVA set to launch 14.9 billion euro hostile bid for Sabadell [https://www.reuters.com/business/finance/bbva-set-launch-149-billion-euro-hostile-bid-sabadell-monday-2025-09-05/]
[7] Banco Sabadell Press Room, Josep Oliu on standalone strategy [https://comunicacion.grupbancsabadell.com/en/press-room/josep-oliu-banco-sabadells-standalone-strategy-is-delivering-and-will-create-more-value-for-shareholders-now-and-over-the-long-term/]
[8] Morningstar, BBVA clears last hurdle to open $17.4 billion bid [https://www.morningstar.com/news/dow-jones/202509053377/bbva-clears-last-hurdle-to-open-174-billion-bid-to-sabadell-shareholders-update]
[9] Firstonline.info, BBVA gets green light for hostile bid [https://www.firstonline.info/en/BBVA-gets-the-green-light-for-a-hostile-bid-for-Sabadell--starting-Monday--September-8th--ending-October-7th./]
[10] ION Analytics, European bank M&A pipeline [https://ionanalytics.com/insights/mergermarket/european-bank-ma-pipeline-stacked-as-rates-scale-tech-drive-deal-flow/]
[11] Marketscreener, BBVA : Banco Sabadell shareholders can now join [https://www.marketscreener.com/news/bbva-banco-sabadell-shareholders-can-now-join-bbva-to-create-a-european-banking-leader-ce7d59d9d88ff626]