BBVA’s Takeover Bid for Sabadell

BBVA’s Takeover Offer

Banco Bilbao Vizcaya Argentaria SA (BBVA) has made a takeover bid for Spanish rival Banco de Sabadell SA, presenting shareholders with a compelling opportunity. With market conditions poised to shift, this deal might be the best offer Sabadell investors will see for the foreseeable future.

Sabadell’s Stock Performance

Sabadell’s stock has been on an upward trajectory, benefiting from the broader rally in European banking stocks, particularly in Southern Europe. The lender’s valuation has significantly improved since 2020 when an earlier merger discussion with BBVA fell through. At the time, Sabadell’s stock was trading at barely 10% of its forecast book value. Fast forward to 2024, and it has climbed above 50% of book value, reflecting stronger investor confidence.

Market Conditions and Future Outlook

However, much of this growth has been driven by favorable short-term interest rates and government bond yields, which have boosted revenues for Southern European banks. As the European Central Bank (ECB) is expected to begin cutting rates in the near future, these advantages could start to diminish, potentially capping further upside for Sabadell’s stock.

Deal Valuation and Premium

BBVA’s offer, outlined in a letter to Sabadell’s board, proposes an all-share deal at a ratio of one BBVA share for every 4.83 Sabadell shares. Over the past six months, this equates to a premium ranging from just under 30% at the lower end to over 70% at its peak in February. The recent surge in Sabadell’s stock, which has doubled over the past year, has somewhat reduced the premium to about 9% as of Thursday’s close. However, the offer still values Sabadell at nearly 80% of its forecast book value, a level the bank has not reached in nearly a decade.

Shareholder Perspective

For Sabadell shareholders, this deal represents a rare chance to lock in gains and align with a stronger financial institution. While further negotiations could refine the terms, rejecting BBVA’s proposal might mean missing out on a premium valuation that may not return anytime soon.

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