Spanish bank bosses go head-to-head after BBVA turns hostile
Adds Sabadell statement in paragraph 7
By Jesús Aguado and Andres Gonzalez
MADRID/LONDON, May 9 (Reuters) -Sabadell SABE.MC CEO César González-Bueno was in London on Thursday meeting with analysts to champion his bank's success when news landed that rival BBVA BBVA.MC was going hostile with its 12.23 billion-euro ($13.2 billion) takeover offer.
The surprise move - the first hostile banking takeover bid in Spain since the 1980s - pits the banks' same long-standing executives against each other who tried and failed to negotiate a deal between Spain's second- and fourth-largest banks in 2020.
After a new approach last month, BBVA Chair Carlos Torres gave his Sabadell counterpart, Josep Oliu, a clear message in a May 5 letter: there would be no improving its all-share offer.
Sabadell took the unusual step of publishing that missive after its board had rejected the deal, leaving analysts scratching their heads about BBVA's next move.
Three bankers in Madrid, who have worked with both lenders and spoke on condition of anonymity, said they were "amazed" by the aggressiveness of the decision to go hostile so soon.
"Going hostile in a domestic (financial institution) transaction is super-rare," London-based advisory firm MKP Advisors said in a note. "But it has always felt somewhat in the last few days that BBVA could have been building up to this."
Sabadell and BBVA declined to comment.
Sabadell informed Spain's securities regulator, CNMV, that BBVA's takeover bid and the information it provided on Thursday violate the country's tender offer rules and "introduce incomplete information that may affect the market".
BBVA's announcement triggered immediate opposition from the government in Madrid.
Spanish economy minister Carlos Cuerpo said his government opposed the hostile takeover because it would have potentially harmful effects on Spain's financial system.
Carles Puigdemont of separatist party Junts, who is running for president of Catalonia - the wealthy region of Spain that Sabadell has called home since 1881 - said the takeover must be stopped.
Speaking to reporters on Thursday as BBVA shares dropped 6%, Torres seemed unruffled. If going hostile damaged BBVA's reputation then "so be it", he said.
Torres, a 16-year veteran of BBVA and chair since 2018, has been eyeing Sabadell ever since the 2020 attempt failed.
But he had doubts Oliu would ever agree to sell a bank the 75-year old Catalan has headed since 1999, according to two bankers familiar with Torres' thinking.
Torres said on Thursday that he had met with Oliu in mid-April and was preparing to detail proposed merger terms on April 30 before news of the takeover leaked to the media, scuppering the meeting and forcing his hand.
Since the 2020 takeover talks, Sabadell shares have risen five-fold, while BBVA's have gained more than 160%.
Analysts said BBVA's ability to offer more and still squeeze out sufficient cost savings was limited.
NEVER EASY
Torres and CEO Onur Genҫ, also in his role since 2018, have led a surge in growth at BBVA by betting big on Mexico and Turkey. The bank's market cap recently approached long-time rival Santander SAN.MC, a bank with significantly more in assets.
But analysts and investors have begun to flag an over-reliance on Mexico, where business has boomed, and the appeal of Spain where higher interest rates have swelled bank coffers.
Clinching European banking deals has never been easy, with politics often impeding progress even as European Central Bank supervisors have encouraged greater consolidation across Europe's fragmented industry.
The proposal leaves Sabadell, which has enlisted the help of Goldman Sachs and Morgan Stanley as advisers, with limited options.
Analysts at Berenberg said they were reassured by Torres' comments that he did not see supervisory obstacles to the deal and that political opposition would be short-lived.
"He (Torres) believes that the transaction creates a bank that can better support the society and makes sense for Spain as a country as well (having stronger banks)," they said.
Sabadell's CEO - in the role since shortly after the aborted 2020 talks - and the bank's CFO cancelled their London meetings on Thursday and were rushing back to Madrid, two sources close to the matter said.
Torres and his team will now be seeking to persuade regulators of the merits of the deal, which the bank said could take six months, before formally going to shareholders.
($1 = 0.9281 euros)
Reporting by Jesús Aguado and Andres Gonzalez; Additional reporting by Emma Pinedo and Charlie Devereux in Madrid and Gursimran Kaur in Bengaluru; Writing by Tommy Reggiori Wilkes; Editing by Jane Merriman and Christopher Cushing
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