BBVA seeks permission from CNMC to bid for Banco Sabadell

BBVA has already submitted a request for authorization to the National Commission of Markets and Competition (CNMC) to begin the operation he proposed regarding Sabadell Bankas market sources told Europa Press and laSexta, they were able to confirm this.

The organization was due to complete this step last Friday, a week after submitting a request for permission to carry out a takeover bid to the National Securities Market Commission (CNMV).

BBVA would send out a separate brochure to each supervisory authority, as the Competition would verify the level of banking concentration existing in the company as a result of the takeover bid and merger, while the CNMV would be responsible for verifying the information that BBVA provided to the market in order to implement the takeover bid.

To apply for a hostile takeover of Sabadell, BBVA needs two prior approvals: from the European Central Bank (ECB) and from the CNMV.

Likewise, the effectiveness of the takeover bid will depend on at least 50.01% of Sabadell shareholders participating in the BBVA board’s approval of the capital increase to carry out the share exchange (a meeting already scheduled for July 5) and obtaining approval. CNMC and the Prudential Regulation Authority (PRA) of the United Kingdom.

It means that BBVA does not require prior approval from the CNMC to submit a takeover bid.but to achieve its efficiency, which opens up a scenario in which a bank may launch an operation in the market without knowing whether Competition sets the conditions for the operation and what they will be.

However, three authorizations are performed in parallel: BBVA has already submitted a takeover bid with the presentation of the application and brochure to the CNMV to follow submission of documentation to the ECB and Competition.

The first “approval” will be from the ECB and it is this that the CNMV will use to allow BBVA to open the takeover bid acceptance period, which can last from 15 to 70 days. The law governing these operations provides for the possibility of expanding the operation if it “becomes necessary.”

Operation formalization process

As stated in the Competition Act, the merger control analysis consists of two stages. In the first stage, which lasts “maximum one month“—without taking into account possible suspensions to request additional information—the transaction is analyzed and the CNMC Board decides whether the transaction should be archived, whether it can be authorized (with or without obligations) or, conversely, the concentration needs to be analyzed in more detail due to competition concerns, which it can cause.

This will give way to the second stage of the procedure, where the participation of interested third parties is expected, and can be extended for a maximum of three months without taking into account possible interruptions.

After the second stage of analysis, the CNMC may decide to authorize the transaction, archive it, authorize with obligations, authorize with conditions, or prohibit it. In the last three cases, the Competition must submit its decision to the Ministry of Economy, which, in turn, can make it by “reasons of general interest“, to the Council of Ministers within 15 days.

“The final agreement (of the Council of Ministers), which may permit concentration with or without conditions“, must be accepted within a maximum of one month, and a report may be requested,” the competition website states. In addition, the Competition Law states that the final agreement must be “duly motivated.”

Article 10.4 of the same regulation actually provides that the Council of Ministers can assess economic concentration.”taking into account criteria of general interest“, in addition to the protection of competition, including such factors as national defense and security, the protection of public safety or health, the free circulation of goods and services within Spanish territory, the protection of the environment, the promotion of technological research and development and the guarantee that the objectives of industry regulation are adequately met.

The two most recent banking mergers, CaixaBank and Bankia on the one hand, and Unicaja and Liberbank on the other, were approved in the first stage with certain conditions. In the first case, CNMC took four months, and in the second it did not even reach two months. In none of them was this accomplished through a hostile takeover.

However, in recent weeks, Banco Sabadell has publicly stated that the operation proposed by BBVA is ineffective. “very different” case from the merger of CaixaBank and Bankia: “This has nothing to do with it, because Bankia was primarily a bank for individuals, where one product was enough.”

“(SMEs, a segment in which Sabadell has a relevant share) need several banks, It’s not like getting a mortgage or when you have a current account (…). This is much more relevant because SMEs need one, two, three or four banks because they use different products every time,” Cesar Gonzalez-Bueno, CEO of the Catalan bank, emphasized in a recent interview.

It should be noted that in addition to the possibility of the CNMC transferring this operation to the Council of Ministers, the Law on the Supervision of Credit Institutions includes a provision according to which gives the economy the ability to authorize merger transactions, following a report by Sepblac, Bank of Spain, CNMV and DGSFP. However, this step is necessary for the approval of a merger, not a takeover bid.