BBVA shareholders have approved a €10 billion share issuance to facilitate the Spanish bank's hostile takeover bid for Banco Sabadell, overcoming a hurdle for the largest transaction in the European banking sector this year.
At an extraordinary general meeting on Friday, 96 percent of BBVA investors gave the Chairman, Carlos Torres, the green light to issue shares that he intends to offer to Sabadell shareholders in an all-share exchange. This exchange is expected to begin towards the end of this year.
The controversial offer from BBVA, which has a market value of €55 billion, faces resistance from Sabadell, the owner of the British high-street bank TSB. Sabadell has already rejected a friendly approach under the same conditions.
The offer also faces further obstacles, including a review by the Spanish competition authority and resistance from the Spanish government, which has vowed to prevent a bank merger even if BBVA successfully takes over Sabadell.
Torres, who has tied his own fate to the deal, explained to the shareholders that the transaction is 'enormously attractive' and represents a safe bet on Spain and its small businesses, a customer group in which Sabadell is strong.
With the integration of the two businesses, we will gain in size... We will become the second largest bank in terms of credit market share at the national level and strengthen our competitiveness in the domestic market," said Torres.
A person close to Sabadell said that the outcome of the vote on the stock issuance "has no impact on the deal" and is not surprising. "There are still so many gaps in what BBVA is proposing and so many uncertainties hanging over it. This is a long process, and ultimately the Sabadell shareholders, along with regulators and the government, will decide," the person said.
BBVA plans to offer one of its newly issued shares for every 4.83 Sabadell shares, meaning that investors of the smaller bank would own 16 percent of the combined company. BBVA’s offer initially valued Sabadell at €12 billion, but its value has dropped as the potential buyer’s share price has fallen.
BBVA emphasized optimistically that nearly half of its shareholders also own shares in Sabadell and pointed to the 96% support for the share issuance.
In a letter to Sabadell shareholders on Thursday, Chairman Josep Oliu wrote that approval of BBVA's capital increase "does not imply a decision [regarding the takeover offer] by shareholders who hold shares in both institutions.
Institutional Shareholder Services, an influential proxy advisor, recommended that investors vote in favor of the share issuance, but noted that "the lack of support from the Sabadell board [for the offer] and the pending regulatory approvals create uncertainties about the success of the offer and the subsequent integration and value creation for the combined group.
