Spanish Government Approves BBVA's €14 Billion Sabadell Takeover Bid With Three-Year Merger Ban; Sabadell Sells TSB to Santander for €3.4 Billion

The Spanish government has approved BBVA's €14 billion ($16 billion) hostile takeover bid for Banco Sabadell but imposed strict conditions that prevent the two banks from merging or integrating their operations for at least three years. The government requires BBVA and Sabadell to operate as separate entities during this period, maintaining distinct legal personalities, separate assets, and autonomous management. Additionally, the government has emphasized protecting jobs, safeguarding branch networks, supporting small and medium-sized enterprises (SMEs), and promoting financial inclusion for older and rural populations. These restrictions have cast uncertainty over the future of the acquisition, prompting BBVA to reassess the deal's viability and consider legal action, including a potential appeal to the Spanish Supreme Court. Despite these challenges, BBVA's board, led by Carlos Torres, has decided to proceed with the takeover offer, contingent on continued investor support.

In parallel, Banco Sabadell has agreed to sell its UK subsidiary, TSB Bank, to Banco Santander for approximately £2.65 billion (around €3.4 billion or $3.64 billion). This sale, confirmed by multiple sources and pending shareholder approval, is viewed as a strategic move that complicates BBVA's takeover bid by increasing the remuneration to Sabadell's shareholders through a proposed extraordinary dividend of about €3.8 billion over the next 12 months. Sabadell's CEO, César González-Bueno, has stated that the TSB sale is independent of the BBVA takeover bid but acknowledges that it raises the acquisition cost for BBVA. The sale also strengthens Santander's presence in the UK, making it the third-largest bank by deposits in the country. Sabadell has called two extraordinary shareholder meetings scheduled for August 6 to approve both the TSB sale and the associated extraordinary dividend, with provisions for remote voting starting July 15.

The ongoing takeover battle has led to increased market volatility and shareholder tension. Minority shareholders of Sabadell have expressed skepticism about the viability of BBVA's offer under the new conditions. Analysts suggest BBVA may need to increase its bid by approximately 27%, or €2.2 billion, following the TSB sale. Meanwhile, BBVA maintains that the TSB transaction does not hinder its acquisition plans and stresses the strategic value of the deal for shareholders of both banks. The situation remains fluid as BBVA evaluates its next steps amid regulatory hurdles and competitive pressure from Santander's acquisition of TSB.