risk of failure and average time frame ten months

The National Markets and Competition Commission’s (CNMC) decision to review BBVA’s second-stage takeover bid for Banc Sabadell raises the risk of failure. Not only is the banking sector entering an unprecedented period with uncertain timing, but it is also opening the door to possible Government intervention. The history so far shows that a quarter of the concentrations analyzed in detail by Competition in recent years were ultimately withdrawn.

Since Kani Fernandez took over as CNMC president in June 2020, the organization has examined twelve second-phase operations, of which three have been abandoned. This is a quarter. Just a week ago, French outdoor advertising giant JCDecaux pulled out of its acquisition of its main Spanish rival Clear Channel due to competitive conditions. Previously, the British company Modulaire refused to acquire the Navarre-based company producing prefabricated sheds Balat for the same reasons. Boston Scientific’s attempt to acquire MITech also failed.

Beyond the CNMC, there have been several notable cancellations of major operations at European level, equivalent to the European Commission’s second phase. Highlights were the purchase of Air Europa by Iberia and the rail integration between Siemens and Alstom a few years ago.

Up to one and a half years

The last seven phase two operations handled by CNMC closed within an average of ten months. These range from seven months of integration between Logista and Distrisur to 18.5 months of integration between Santa Lucia and Funespaña. In all cases, CNMC imposed conditions or the buyers made concessions.

BBVA hopes that the CNMC will not take too long to resolve the case because, as the regulator has already indicated, the “detailed investigation” already carried out in recent months “will lead to greater efficiency in the analysis in the second stage.” However, from within Sabadell it is predicted that this will take at least six months and that, in addition, the National Securities Market Commission (CNMV) will not approve the takeover prospectus until it receives the opinion of the CNMC.

Experts agreed in favor of giving this process a period of at least six months. “In this case, the transition to the second stage did not come as a surprise. This sector is starting to see a high level of concentration,” they point out at a major consulting firm. “A hostile takeover is objectively difficult because the buyer is not cooperating” and “the question now is whether BBVA will be interested in accepting everything that is asked of it.”

Experts expect the analysis to last at least six months.

Competition lawyers have already outlined all the procedures that await BBVA: a brief from the CNMC to receive the allegations, a statement of facts, public hearings, possible hearings with the companies, negotiation of obligations (there may be several rounds) and market tests to study the rest. competitors. In principle, the second stage sets a period of three months, but the clock may stop. Something similar happened at the first stage, which lasted about five instead of one month.

In the BBVA-Sabadell case, “there are two problems: time and lack of knowledge about how it might end,” they say at a major law firm, before recalling the possibility that the government will impose additional conditions. To speed up the process, BBVA could “offer a jewel in the crown, such as the sale of Sabadell’s SME business in Catalonia.”

Telecoms paving the way for possible sale of Unicaja assets

These sources indicate that BBVA took as its basis the merger of CaixaBank and Bankia, which included behavioral conditions but no asset sales. However, the panorama has changed. “Here we are going not from five to four banks, but from four to three, and this is more difficult from a competitive point of view. Now this is more like the case of telecommunications companies Orange and MásMóvil, which had to sell assets to Digi,” they say. We are talking about sacrifices in order to maintain a strong fourth operator in the market, which in this case will be Unicaja.