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Key Elements on the Takeover Bid

BBVA submitted a merger proposal which Banco Sabadell’s Board of Directors rejected

The rejected proposal had the same economic conditions as the takeover bid.

Prior to the announcement of the takeover bid, the Board of Directors of Banco Sabadell had rejected an unsolicited, tentative, and conditional merger proposal received from BBVA on 30 April (under the same economic conditions later set out in the takeover bid).

The Board of Directors of Banco Sabadell rejected the proposal, as it significantly undervalued Banco Sabadell’s business and its future growth prospects as an independent institution. The Board of Directors expressed its full confidence in Banco Sabadell’s growth strategy and financial goals, believing that Banco Sabadell’s strategy as an independent institution would generate greater value for its shareholders. It also indicated that the significant fall and volatility of BBVA’s share price in the days prior to the rejection of the proposal led to additional uncertainty about the value of the proposal.

Based on a detailed analysis of the proposal, the Board of Directors concluded that the offer was not in the interest of Banco Sabadell or its shareholders, and consequently rejected BBVA’s proposal.

The Board of Directors added that it believed its decision was in line with the interests of Banco Sabadell’s clients and employees.

In relation to Banco Sabadell’s business, it is worth noting that the bank went from earning €2 million in 2020 to €1.332 billion in 2023. In other words, Banco Sabadell went from a Return on Tangible Equity (ROTE) of 0% in 2020 to 11.5% in 2023. Following this striking improvement in profitability, Banco Sabadell’s share price rose from €0.35 per share on 31 December 2020 to €1.91 per share on 24 May 2024, the date on which BBVA filed the application for authorisation of the takeover bid before the CNMV, positioning itself as the Ibex 35 stock that has undergone the greatest revaluation during the that period.

In 2024, Banco Sabadell’s results have continued to improve:

  • The Bank has delivered a profit of €791 million in profit, the best half-year figure in its history.
  • This level of profits has allowed the Group to increase its ROTE to 13.1% as at the end of June, representing an improvement of 395 basis points year-on-year compared to 12.2% in the previous quarter and 11.5% at the end of 2023.
  • The CET1 FL capital ratio has risen to 13.48%, entailing an increase of 18 basis points in the quarter and of 27 basis points compared to the end of 2023.
  • Commercial activity in Spain consolidated the good performance of the first quarter, with strong growth in lending to SMEs and corporates, mortgages, and in consumer loans, alongside an improvement of margins and asset quality.
  • TSB increased its mortgage completions by 42% year-on-year and contributed 95 million euros to Group profit.
  • Following its profound transformation, the Bank has reiterated its improved prospects by delivering record results and highlighting its increased capacity to generate capital and long-term value for its shareholders.

See the complete information on results presentations: Economic and financial information (grupbancsabadell.com)

Shareholders do not have to make any decisions regarding the takeover bid at this time

At the appropriate time, Banco Sabadell shareholders will get the opportunity to decide whether or not to accept the takeover bid.

The takeover bid process is long and complicated. We do not yet know when the offer period will commence, but it is likely to be some months off.

Only at that time, will Banco Sabadell shareholders be asked to make a decision as to whether or not to accept BBVA’s offer.

Once the CNMV approves the takeover bid, the so-called “acceptance period for the takeover bid” would begin.

The information needed to make a decision is not yet available

Banco Sabadell shareholders need to receive much more information in order to make a proper decision.

Banco Sabadell shareholders will still need to receive much more information before making their decision.

In order to make this possible, and to provide Banco Sabadell shareholders with sufficient information to make an informed decision, the Board expects BBVA to have published clear, transparent and comprehensive information on all aspects of the takeover bid that may have an impact on the value of the offer. This is important given that the newly issued BBVA shares constitute the takeover bid price.

In its report, Banco Sabadell’s Board of Directors will analyse the following aspects which it deems necessary to assess the takeover bid:

  • Detailed financial impacts of the bid, in the event of a subsequent merger of both institutions or, including in the event there is no merger.
  • The expected synergies in both a merger and no merger scenario, as well as the associated restructuring costs and their impact on capital in each case.
  • Estimated business losses, including in the SME segment.
  • The expected capital impacts as a consequence of a) the possible termination of commercial agreements or joint ventures that the Banco Sabadell has entered into with third parties and, or b) the impacts of the required Fair Value Adjustments of the bond and credit portfolios.
  • Any competition conditions or remedies that may be imposed by the Spanish National Markets and Competition Commission (CNMC) that are relevant to the value of the bid, as well as any additional restrictions that may be imposed by governmental bodies.
  • And other aspects that might be necessary.