The future distribution of power complicates the merger of BBVA and Sabadell

The speed with which BBVA’s second attempted merger with Banco Sabadell crystallized into a formal proposal has given way to a cooling induced by Barcelona. “We have not yet decided if we want to negotiate,” sources close to the Catalan entity commented this Friday. After two dizzying days, the bank wants to take its time and gather all the relevant information before its board decides whether to pick up the gauntlet. At the moment, he has already hired his team of advisors: Goldman Sachs, Morgan Stanley and Uría.

The sources consulted warn that the price and the distribution of powers will be the hardest points in the talks (if they arrive). BBVA offers Sabadell three directors. The other 15 would be from BBVA, a distribution derived from the exchange equation, which would be replicated in the management positions: 16% of the executives would come from the Catalan bank and 84% from the entity of Basque origin. “The price offered is reasonable and the market values ​​it well,” adds another source also close to the first line of command of the group of Catalan origin. “What does not quite add up is that the entry of three councilors is maintained, as was agreed in 2020,” he points out.

Then the president of Sabadell, Josep Oliu, was running for vice-presidency (a position that would be maintained for Sabadell in the current proposal). But it is not clear what the fit in this structure of the CEO, César González Bueno, who arrived in Sabadell after the previous merger attempt had failed, to replace Jaume Guardiola. Within the Sabadell board, there is widespread distrust in this regard, since it would leave little room for its current directors and would put one foot on the street for the directors who have straightened the direction of the group and quadrupled the value on the stock market. “If there is no selection process based on merit, almost all of us are out,” acknowledge several sources from the entity’s front line.

The main offices in the financial sector do not agree that Carlos Torres can close his mouth in this regard. “It would be understandable if it were a small acquisition, but it is difficult to argue that the same advice should be maintained when buying a bank like Sabadell,” say sources close to European banking supervisors. The solution may involve a change in the balance on the council, an option that does not arouse enthusiasm in La Vela. “Carlos Torres does not want to put the current balance of the board at risk,” says a voice close to the top executives of the group of Basque origin.

Financial sources recall that both banks already know each other and, although the talks failed four years ago, they now know the limits of each and how far they can go. In 2020 the problem was the price. Today, investment banking sources point out, BBVA would not be contemplating in principle an improvement in the conditions, which they already consider generous, with a 30% premium over the price prior to the leak. But the fall in the stock market is limiting the attractiveness: the offer today is, in financial terms, 10% lower than that of Monday. However, the market does not believe that price can be an insurmountable obstacle. Or, at least, no more than the distribution of the council. What they do rule out from both Madrid and Barcelona is a hostile takeover.

However, the haste of events has caught both parties on the wrong foot. The Sabadell environment considers BBVA’s approach aggressive (they are careful to use the term hostile), despite the fact that other market sources indicate that meetings at the highest level had already occurred. However, the idea was for the dance to start a little later. “The conversation in high financial circles began weeks ago and it was assumed that it would be leaked at any time. The idea was to hold out until after the Catalan elections to avoid the political variable in the equation,” financial sources explain.

Now a prompt response is expected from Madrid (the fall in the share makes the offer less attractive), and it is observed with some concern how in Sant Cugat the idea of ​​not rushing takes precedence. Yesterday the Bloomberg agency reported, in turn, that Sabadell was inclined to start negotiations, without a decision having been made. But the bank wants to set its times, once BBVA has already set its own this May Day.

If at the end of 2020 the one who was at risk (and needed the operation) was Sabadell, now BBVA seems to be the most interested. In fact, the bank’s dome cannot fail again, since it would be a second trip over the same stone. Then they had another asset (they expanded their exposure in the Turkish subsidiary Garanti), an alternative that is not ruled out on this occasion either. “For months, the bank’s strategy heads have been working on a plan B on another possible operation. But all roads lead to Sabadell, which would resolve many of BBVA’s debts,” says another source very close to the bank’s leadership.

“They need it.” [la operación] to meet the objectives set for the coming years and, above all, to not depend so much on emerging countries,” they argue within the first line of command of the group of Basque origin. That is, you will have to give in on some points if you do not want the operation to falter.

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