(Bloomberg) — BBVA SA decided to keep its takeover offer for Banco Sabadell SA alive even though the Spanish government’s decision to ban a merger for several years has cast doubt over how it will pan out.
“BBVA has decided not to withdraw the offer and, therefore, it remains in effect in accordance with the applicable regulations,” the bank said in a statement on Monday, confirming a Bloomberg News report from last week.
The decision means the potential creation of a new Spanish banking behemoth is still on the cards despite opposition from the government and other political parties, as well as rejection by Sabadell’s management. It paves the way for BBVA Chairman Carlos Torres and Chief Executive Officer Onur Genc to submit the tender offer to Sabadell shareholders soon, once final permissions have been obtained.
Shares in BBVA dropped as much as 0.3% in early trading while Sabadell’s were up as much as 1.6%.
Madrid decided last week that the proposed acquisition can only go ahead if the two banks remain separate entities for at least three years. That has raised questions over BBVA’s ability to extract cost savings and make the deal work economically.
BBVA said it’s moving forward “because the transaction creates value for the shareholders of both entities, even though the condition will delay some of the estimated synergies.” It didn’t specify any amounts.
The bank’s previous projections assumed savings of €300 million ($353 million) from job cuts, €100 million lower funding costs and €450 million from administration and technology. Some of those are still attainable if the two banks “operate from a joint IT platform,” Citigroup Inc. analyst Marta Sanchez wrote previously.
BBVA has said before that the acquisition would still make sense even if the government were to stand in the way of a full-blown merger.
“The merger represents a unique opportunity to build one of the most competitive and innovative banks in Europe,” Carlos Torres, BBVA chairman, said in a separate statement.
The commitment from BBVA also comes after Sabadell moved to potentially sell its UK unit TSB, attracting interest from Banco Santander SA and Barclays Plc. Sabadell is expected to take a decision on the offers for this subsidiary on Tuesday, Reuters reported.
Other potential bank deals that have faced political headwinds across the European Union include UniCredit SpA’s bid for domestic rival Banco BPM SpA and its pursuit of Germany’s Commerzbank AG.
BBVA, whose formal name is Banco Bilbao Vizcaya Argentaria SA, made an unsolicited bid for Sabadell in May last year that was quickly rejected by the takeover target. The move also sparked political opposition, with Spain’s government arguing that a deal would raise competition issues.
A combination of the two banks would create a new behemoth in the country, with more than 140,000 employees worldwide. BBVA is Spain’s second-largest bank by market value and Sabadell is its fourth-largest one.
(Updates with context in third paragraph and share movement in fourth.)
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