Banco Sabadell shares fell 0.66% after CNMC decision: analysts consider takeover more difficult | Companies

Banco Sabadell’s share price is slightly different from BBVA’s share price after it became known that the National Markets and Competition Commission will move the possible merger of the two companies to a second stage of analysis due to its impact on competition in the banking sector. Thus, the Catalan bank fell by 0.66% (to 1.73 euros) in the first minutes of the session, while BBVA traded virtually unchanged (8.93), despite a sharp drop yesterday on the New York Stock Exchange (ADRs fell by 2 .88%). This second phase involves stricter oversight of the terms of the takeover offer, extends the deadline until at least next summer and assumes that the final terms of the purchase, if finalized, will be accepted by the government. As part of this process, the CNMC will also seek the views of companies, unions or user associations.

In short, this is a setback for the plans of BBVA, which by this point had already expected to gain control of Banco Sabadell, and a risk for the operation, which is conditional on receiving the green light from the Competition. BBVA CEO Onur Genç noted during the results presentation that “if CNMC imposes conditions that would affect the value creation of the takeover bid, we may back down.” Overall, the market reaction is limited and although today’s evolution widens the gap between Banco Sabadell’s price and BBVA’s supply, the movement is insignificant compared to the presentation of the supply. At market prices and with an exchange equation of 5.0196 Sabadell shares for every BBVA share, this bank will offer the equivalent of 1.78 euros per Sabadell share, at a premium of 3%. In the days before the takeover bid was submitted and before it became official on May 9, Banco Sabadell’s shares rose by more than 25%.

Analysts agree that CNMC’s decision complicates BBVA’s plans. “This is bad news because it increases uncertainty about the outcome since the CNMC has at least three months to make a decision and there is no CNMV approval. In addition, it reduces the likelihood of success of the transaction, since it increases the likelihood that CNMC will increase the requirements for BBVA to authorize the takeover bid, which could negatively impact the originally planned synergies and profitability,” they point out from Bankinter. The enterprise believes that “the likelihood of success of the takeover bid is reduced unless BBVA improves the exchange equation and/or increases cash payments.” However, moving to the second stage of analysis was already in the market pools, which may have limited the effect. This is indicated by analyst Marta Sanchez Romero, who believes that the surprise is limited and the market has begun to discount it. “Long-term uncertainty around this process continues to weigh on BBVA’s share price,” he told Bloomberg.

Renta 4 is more positive about the outcome: “We do not believe that the conditions that CNMC may impose on BBVA to approve the transaction will force the company to abandon the offer. We believe the most realistic scenario is acceptable terms for the bank, although uncertainty about the impact on the numbers increases, making the transaction less attractive.” Kepler’s Maria Antonia Casado notes that there is a growing risk that the agreement will be derailed by moving to a second phase, given government opposition and the fact that Banco Sabadell shareholders may view the operation as riskier and riskier. less attractive, according to Bloomberg.

The government will wait for the final decision

In fact, this morning the government expressed its doubts about the proposal, although it will not make a decision until it knows the final opinion of the CNMC. Economy, Trade and Business Minister Carlos Bodi, in a statement to RNE published by Europa Press, said the executive had a vision for a takeover bid “of common interest” and that it appreciated the troubling elements “from the outset”, including the impact of excessive concentration on them both for financial clients themselves and in terms of financial inclusion; impact on employment and territorial cohesion; and the impact on SME credit or financing.”

“This joint assessment or assessment of all these effects is unique on the government side because each of the institutions has to look at its own mandate. And this is the area in which we are looking at this operation and will do it to the end,” the minister concluded, emphasizing that competition is one of the issues that worries the Council of Ministers most. “Let’s wait to see the final result of the assessment. It’s true that it delays the process a little.”