The Strategic and Financial Implications of BBVA’s Hostile Bid for Sabadell

BBVA’s 14.8 billion euro ($17.34 billion) hostile takeover bid for Banco Sabadell, launched on September 8, 2025, represents a high-stakes gamble to reshape Spain’s banking landscape. While the offer aims to create the second-largest domestic bank in Spain, behind Caixabank, its feasibility, regulatory risks, and long-term value creation for shareholders remain contentious. This analysis evaluates the bid through these lenses, drawing on recent developments and market dynamics.

Feasibility: A Bid at a Structural Disadvantage

The bid’s structure—a mix of one newly issued BBVA share and €0.70 in cash for every 5.5483 Sabadell shares—has been criticized as unattractive to shareholders. According to a report by Reuters, the offer is effectively "underwater," as Sabadell’s shares have outperformed BBVA’s since the initial rejection of the bid in April 2024 [3]. For instance, a €10,000 investment in Sabadell would translate to €9,129.35 in BBVA shares and cash under the current terms, eroding shareholder value by €870.65 [5].

Despite regulatory approvals, including from the Spanish National Securities Market Commission (CNMV) and the U.S. SEC, the bid faces a critical hurdle: shareholder acceptance. The SEC’s approval reduced the minimum acceptance threshold to 30% of voting rights, with a mandate to launch a second all-cash offer if acceptance falls between 30% and 50% [4]. However, BBVA has publicly stated it will not sweeten the offer, even though it retains the legal right to do so until October 2 [1]. This inflexibility raises questions about the bid’s viability, particularly as Sabadell’s management has actively defended its shares through dividends and buybacks, returning €6.3 billion to shareholders over the next three years [5].

Regulatory Risks: Constraints and Uncertainties

While the bid has cleared key regulatory hurdles, including approvals from the European Central Bank and Spanish competition authority, the Spanish government has imposed significant restrictions. A three-year ban on merging the entities’ assets and operations limits immediate synergies, delaying potential cost savings until 2029 [3]. This timeline introduces uncertainty, as regulatory environments can shift, and future governments may impose additional constraints.

Moreover, the bid’s cross-border nature introduces risks beyond Spain. Although the U.S. SEC has greenlit the offer, other jurisdictions—particularly those where Sabadell operates—could pose unforeseen challenges. For example, the sale of Sabadell’s UK subsidiary, TSB, has already demonstrated the complexities of divesting international assets [5]. Any regulatory pushback in these markets could further complicate integration.

Long-Term Value Creation: Promises vs. Realities

BBVA argues that the merger will generate €900 million in annual synergies and boost earnings per share (EPS) for Sabadell shareholders by 25% [4]. However, these benefits are contingent on successful integration, which is far from guaranteed. The three-year delay in asset consolidation means shareholders may not see tangible gains until 2029, a timeline that stretches beyond the immediate acceptance period.

Sabadell’s management has countered that its standalone performance—highlighted by a higher dividend yield and robust shareholder returns—already outpaces BBVA’s projections. Data from Morningstar indicates that Sabadell’s shares have delivered double-digit returns since rejecting the bid, outperforming BBVA’s flat performance [3]. This track record strengthens Sabadell’s position in resisting the offer, as shareholders may view the bid as a short-term loss for uncertain long-term gains.

Strategic Implications for the European Banking Sector

If successful, the merger would create a banking giant with €500 billion in assets, positioning it to compete with Santander, BNP Paribas, and HSBC [4]. However, the bid’s current structure undermines its strategic appeal. Analysts note that the combined entity’s ability to leverage scale will depend on overcoming cultural and operational divides between BBVA and Sabadell, which have distinct risk profiles and market focuses.

Conclusion: A High-Risk, High-Reward Proposition

BBVA’s hostile bid for Sabadell is a bold move with the potential to reshape European banking. However, its feasibility hinges on overcoming structural disadvantages, navigating regulatory constraints, and convincing shareholders of long-term value. With the acceptance period ending on October 7 and results due by October 14, the coming weeks will be critical. For now, the bid remains a speculative bet, with Sabadell’s strong standalone performance and BBVA’s inflexible offer terms casting doubt on its success.

Source:
[1] Spain's BBVA launches 14.8 bln euro takeover bid for Sabadell,
https://www.reuters.com/sustainability/sustainable-finance-reporting/spains-bbva-launches-148-bln-euro-takeover-bid-sabadell-2025-09-08/
[2] 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
[3] BBVA-Sabadell: Deal Launches Underwater, Arbitrage Still Asymmetric,
https://www.smartkarma.com/insights/bbva-sabadell-deal-launches-underwater-arbitrage-still-asymmetric?utm_medium=feed&utm_source=RSS
[4] Banco Sabadell Shareholders Can Now Join BBVA to Create a European Banking Leader,
https://www.bbva.com/en/bbva-offer-sabadell/banco-sabadell-shareholders-can-now-join-bbva-to-create-a-european-banking-leader/
[5] OPA - Banc Sabadell - Comunicación,
https://comunicacion.grupbancsabadell.com/en/opa/