Madrid, Feb 28 - Spanish bank BBVA's 10-month-old hostile bid for smaller rival Sabadell faces a crucial test in March when the competition regulator is expected to announce the outcome of its review.
BBVA's unexpected move on Sabadell last year was initially seen as the start of increased deal-making activity among European banks, shedding light on the intricate nature and political entanglements of banking merger transactions.
The 12.28 billion euro offer made by BBVA for Sabadell was countered following Sabadell board's rejection. With the competition regulator reviewing the situation and seeking additional time for a decision, BBVA may need to provide further commitments or face potential conditions that could hinder the deal.
While BBVA has expressed readiness to comply and proceed with the acquisition, analysts remain wary as delays cast doubts on the deal's future. Sabadell is adamant that structural changes, rather than short-term measures, are imperative for the deal to progress.
The regulatory journey ahead involves approvals from two more entities - the markets supervisor and the government - prior to the shareholders' voting period lasting between 30 to 70 days. Government opposition, citing concerns over job losses and customer repercussions, could pose a significant hurdle to the deal's completion.
As the saga unfolds, stakeholders debate the extent of government intervention in the deal, with Sabadell and BBVA holding divergent views on potential requirement adjustments. If the deal proceeds according to BBVA's plan, the government retains authority to prevent a full merger, potentially leading to Sabadell operating independently under BBVA's oversight.
The path forward includes a potential need for BBVA to enhance its offer, although any revisions are not anticipated until the bid acceptance phase. Despite uncertainties, market sentiment remains cautiously optimistic about the deal's prospect, with indications that a slight improvement in offer terms could be on the horizon.
The market's positive perception aligns with expectations for BBVA introducing a cash component of 1 to 2 billion euros to amplify returns from the investment, according to Bank of America analyst Antonio Reale.
($1 = 0.9333 euros)