Spanish Government Approves BBVA’s €14 Billion Sabadell Takeover, Imposes Three-Year Merger Ban Amid TSB Sale to Santander

The Spanish government has approved BBVA's €14 billion ($16 billion) takeover bid for Banco Sabadell but imposed strict conditions that require both banks to operate as separate entities for at least three years, effectively blocking any immediate merger. The National Securities Market Commission (CNMV) temporarily suspended the trading of BBVA and Sabadell shares pending the government's decision on the takeover bid. The government’s conditions also include protecting jobs, maintaining branch networks, supporting small and medium-sized enterprises (SMEs), and ensuring financial inclusion for elderly and rural populations. BBVA is currently evaluating whether to proceed with the offer under these new restrictions and has not ruled out raising the bid, withdrawing the offer, or pursuing legal action, including a potential challenge at the Supreme Court.

Banco Sabadell has requested BBVA to clarify its plans and the expected synergies following the government's intervention. Meanwhile, Sabadell has agreed to sell its UK subsidiary, TSB Bank, to Banco Santander for approximately £2.65 billion (€3.4 billion or $3.64 billion), a move that adds complexity to BBVA's takeover attempt. Sabadell plans to distribute an extraordinary dividend of €3.8 billion to shareholders following the sale. The sale of TSB to Santander is seen by Sabadell's management as independent of the BBVA takeover bid, but analysts note it complicates the hostile offer. Sabadell shareholders face decisions this summer regarding the sale of TSB and the ongoing BBVA takeover bid, with two extraordinary general meetings scheduled for August 6 to approve the TSB sale and the dividend payment. The Banco de España has stated it has no role in the TSB sale or its impact on the BBVA takeover. BBVA's management remains focused on the strategic value of the acquisition and is consulting investors to gauge support amid the regulatory hurdles and increased costs caused by the government's conditions. The situation has created uncertainty around the future of the BBVA-Sabadell deal and the broader Spanish banking sector consolidation.