Spain prevents BBVA from merging with Sabadell for a minimum of three years.

New hurdles for BBVA’s takeover bid of Sabadell

The Spanish government has introduced new challenges to BBVA’s €11 billion hostile takeover of its rival, Sabadell, stating that the two banks cannot merge for at least three years.

Economic Affairs Minister Carlos Cuerpo indicated that the decision ensures the banks must keep their legal identities, assets, and operational independence during this period.

This ruling, stemming from a cabinet review that started last month, places BBVA in a position where it must choose whether to accept these terms, legally contest them, or withdraw its bid altogether.

BBVA’s chairman, Carlos Torres, expressed on Monday his belief that it would be “illegal” for the government to impose such conditions.

This development could also provoke a conflict between the socialist-led government and the European Commission. When the review was first announced, Brussels cautioned Madrid that there wasn’t justification for halting operations due to discretionary government decisions.

Since its initiation in May 2024, the hostile takeover attempt has generated significant controversy. Initially, Sabadell’s board rejected BBVA’s friendly overture, emblematic of the Catalan business elite that Sabadell is part of.

BBVA was gearing up to make a formal offer to Sabadell shareholders in the upcoming weeks, but if the bid goes through, the Spanish government’s restrictions on full mergers will take effect.

Cuerpo emphasized that banks should function independently regarding credit policies, particularly for small and medium-sized enterprises, as well as management of branch networks. He noted that the aim of maintaining two separate entities is to “maximize value independently.”

Additionally, banks are required to report their activities leading up to the three-year mark. Cuerpo mentioned that after reviewing the effectiveness of this condition, the Cabinet might decide to extend it by another two years, making it five in total.

He said that the government’s actions are justified by Spanish law and supported by European Court of Justice rulings to protect small businesses, employees, and local economies.

Neither BBVA nor Sabadell has commented on the government’s recent decision.

It was already known that the Spanish law would grant the government another chance to reject a legal merger between the two banks after an acquisition. Still, this latest action has taken the industry by surprise.