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The Spanish government has cast new obstacles on the path of BBVA’s hostile bids of 11 billion euros against rival lender Sabadell, declaring that the acquirer cannot consolidate the two entities for at least three years.
Spanish Minister of Economic Affairs Carlos Querpo said the Cabinet decided that for more than three years the two entities “need to maintain their separate legal identities and assets and autonomy in managing their activities.”
The decision made after the cabinet review, which began last month, means that the BBVA must decide whether to accept the terms, challenge them in court, or remove the bid entirely.
BBVA chair Carlos Torres, who masterminded the bid, said on Monday it would be “illegal” for the government to impose additional conditions.
The move also led a socialist-led government to a potential conflict course with the European Commission. A spokesperson for the committee said on Tuesday that “the conditions imposed by the government to approve the transaction should be exceptional, proportional and justified by justification in the public interest.”
“If necessary, the Commission uses its powers as a guardian of the treaty to remove unfair restrictions on the single market imposed by Member States,” they added.
Since its launch in May 2024, the hostile bid has become the most disgusting acquisition saga in years. Sabadel’s board initially rejected a friendly approach by the BBVA and rejected the Catalan business elite, where Sabadel has its roots.
The BBVA was preparing to launch a formal tender offer to Sabadell shareholders in the coming weeks. If the BBVA’s purchase bid is successful, the Spanish government’s ban on full mergers will be enforced.
Cuerpo said banks need to act autonomously in areas such as credit clauses such as small and medium-sized businesses, HR and management of branch networks. The goal of two separate entities must be to “maximise value independently,” he said.
He added that banks must submit reports of their actions ahead of the three-year deadline. “Once the effectiveness of this condition is assessed, the Cabinet will decide whether to extend the period of this condition for two more years, from three to five years,” he said.
Cuerpo said the government’s ability to act to defend small businesses, workers and local economies, anticipating potential legal challenges, is supported by Spanish law and “case law of the European Court of Justice.”
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Sabadell said that if the BBVA chooses to proceed with a bid, it would need to provide information on the impact of government terms “both its ability to provide synergistic effects and ability to reward future shareholders. Such information is relevant to Sabadell’s shareholders.” The BBVA declined to comment on the government’s announcement.
After successful bids for the acquisition, it was already known that Spanish law would give the government another opportunity to refuse a legal merger of the two banks. But even so, the move surprised the sector.
Last week, the Financial Times reported that Sabadell was exploring the sale of the UK Bank TSB as it attempted to avoid the hostile approach of the BBVA. Stakeholders were expected to hold a formal bid by the end of June. Barclays and Santander were among the banks that were considering the offer.
If BBVA succeeded in the acquisition of Sabadell, the bank was expected to try to offload the TSB. However, the Spanish government’s decision on Tuesday means that while the companies remain separate corporations, they will block them from doing so for at least three years.
Sabadell’s sale of TSBs is considered in the best interests of Spanish banks and is possible even if they do not violate other government standards.
Additional Reports by Simon Foy of London
