Bankinter | Banco Sabadell’s (SAB) main arguments are: (1) BBVA’s (BBVA) offer is less attractive than the original because, with the current share exchange (no cash payment), Sabadell shareholders would hold 15.3% of the merged entity (as opposed to 16.2% proposed in May 2024), (2) BBVA’s offer does not reflect Sabadell’s potential value on its own, which would be between €3.8/share and €4.0/share according to its estimates, and (3) the attractive three-year remuneration plan for Sabadell shareholders via dividends and share buybacks (around 40% of current market capitalisation).
Bankinter analysis team’s view: The Sabadell Board’s recommendation comes as no surprise; in fact, it has maintained its refusal to merge with BBVA since the takeover bid began in May 2024. The news is that Sabadell’s third-largest shareholder, Mexican investor David Martínez, who holds 3.86% of the capital, has decided to accept the offer because he finds BBVA’s long-term plan interesting.
Even so, we believe that the likelihood of the takeover bid succeeding under the current conditions is low because: (1) The exchange ratio values SAB shares at €3.38/share, which is below our target price (€3.75/share) and implies a premium of just 2.3% on yesterday’s closing price. The current premium does not seem sufficient to convince a high percentage of the capital, and BBVA’s offer is conditional on the acceptance of >50% of SAB’s voting rights. (2) We do not know the current acceptance rate among institutional investors (who represent ~60.0% of SAB’s capital), but it appears that the acceptance rate among retail investors (the remaining approximately 40.0% of capital) is very low. According to SAB’s estimates, only around 20% of retail investors have accepted the offer (against about 25.0% according to BBVA’s estimates). In short, based on the information currently available, it seems unlikely that BBVA will obtain >50.0% of the voting rights.
Even so, BBVA could lower its self-imposed threshold of reaching 50% of SAB’s capital to 30%, but this scenario would involve launching a new cash offer to shareholders who did not accept the current offer and extending the operation for another 4-6 months.
