TSB owner Sabadell rejects BBVA’s £10.3bn takeover bid which ‘undervalues’ bank

Banco Sabadell, the Spanish owner of British high street bank TSB, has rejected a €12bn (£10.3bn) all-share merger proposal from its bigger domestic rival Banco Bilbao Vizcaya Argentaria (BBVA).

Sabadell, which is Spain’s fourth-biggest lender with a market capitalisation of €10bn (£8.6bn), said last night that BBVA’s “unsolicited, indicative and conditional proposal” undervalued the bank’s potential.

“The board believes that the proposal significantly undervalues the potential of Banco Sabadell and its standalone growth prospects,” the lender said in a statement.

“The board is highly confident in Banco Sabadell’s growth strategy and its financial targets and is of the view that Banco Sabadell’s standalone strategy will create superior value for its shareholders.”

The bank added that “the recent material decline and volatility” in BBVA’s stock price increased “the uncertainty around the value of the proposal”.

Last week, BBVA offered an exchange ratio of one newly issued BBVA share for every 4.83 Sabadell shares, a premium of 30 per cent to their closing price immediately before the news broke.

A spokesperson for BBVA said on Monday: “We regret that the board of Sabadell has rejected such an attractive offer.”

BBVA is the eurozone’s second-biggest bank with a market capitalisation of roughly €60bn (£51.5bn). The combined group would have boasted 100m customers worldwide, total assets of more than one trillion euros (£858bn) – second only to Santander, which has a market cap of nearly €80bn (£68.6bn).

Analysts had warned that the gap between the offer and Sabadell’s share price signalled a risk that the deal might not go ahead. Sabadell’s shares rose 8.8 per cent in the days after the offer, while BBVA fell 9.7 per cent.

Sabadell and BBVA previously called off merger talks in November 2020 after disagreeing on the terms and price of the deal.

The breakdown was reportedly triggered in part by a clash over the valuation of TSB, one of Britain’s biggest high street banks, which Sabadell bought for £1.7bn in 2015.

Sabadell has considered selling TSB in the past but rejected an offer from The Co-operative Bank in 2021. Meanwhile, BBVA has a much more limited presence in the UK, with a large stake in app-based Atom Bank.

The Spanish banking sector has experienced a period of consolidation following the financial crisis, with the number of banks in the country falling to 10 today from 55 in 2008.

BBVA and Sabadell have seen a boost to their profits from higher interest rates in recent times, with their share prices soaring 56 per cent and 105 per cent in the last 12 months respectively.