Spain's BBVA Pursues $20 Billion Deal to Become Europe's Third-Largest Bank — 2nd Update

By Elena Vardon and Adria Calatayud

BBVA sweetened its hostile takeover bid for Banco de Sabadell by 10% as it seeks to win over shareholders in its smaller rival and create one of Europe's biggest banks.

The Spanish lender improved the terms for an all-stock offer that now values the target at 17 billion euros, equivalent to roughly $20 billion, in the hope of overcoming opposition from Sabadell's board. It said it doesn't plan to further improve the offer or extend a deadline for shareholders to accept it.

Banco Bilbao Vizcaya Argentaria--as the bank is formally known--went hostile in its pursuit of Sabadell in May last year with the aim of creating one of the region's largest lenders. BBVA is Spain's second-largest bank by market value but does the bulk of its business in emerging markets like Mexico and Turkey. It set its sights on Sabadell--Spain's fourth-largest bank--to bolster its presence in its home market.

If BBVA succeeds in taking over Sabadell, it would become Europe's third-largest bank by market value, after HSBC and Santander.

Sabadell's management has fiercely opposed the bid, which it has repeatedly said undervalues the Catalan lender, and recommended that shareholders don't take up the offer.

BBVA said Monday that it is now offering to exchange one BBVA share for every 4.8376 ordinary Sabadell shares held, compared with its previous bid of one BBVA share and 0.70 euros in cash for every 5.5483 Sabadell shares.

The revised offer values Sabadell at 17 billion euros and represents a 1.6% premium to the stock's closing price on Friday.

Sabadell's board will review the proposal and provide an updated recommendation to shareholders, a spokesperson for the group said. "In the meantime, shareholders are advised to take no action."

The revised offer is "very weak" and worse than the first one, Chief Executive Cesar Gonzalez-Bueno told a local radio station. A much higher premium--between 30% and 40%--would be required to make the deal attractive to shareholders, he added. Sabadell's board has five days to issue a view on the improved offer.

Shares in both banks traded in the red in European early afternoon trading, with Sabadell down 4.0% while BBVA slipped 2.8%.

BBVA's initial all-stock bid valued Sabadell at 12.2 billion euros, though its value fluctuated as the takeover battle dragged on for more than a year amid several regulatory reviews. The exchange ratio was also adjusted to account for dividend payments.

Dropping the cash component addresses one concern of Sabadell retail shareholders as it allows those with capital gains to avoid a tax hit if the acceptance level exceeds 50% of voting rights, BBVA said.

Sabadell has a large base of retail investors and their decision on whether or not to tender their shares to the offer will be key to the success or failure of the transaction. An association of minority Sabadell shareholders had previously said it considered the offer as much too low.

Though the deal has faced several hurdles, BBVA has pressed on. The Spanish government gave its green light on the condition that the banks' entities and assets are kept separate and operate independently for at least three years, effectively banning a legal merger for this period.

Despite this setback that delays the extraction of cost savings and Sabadell's sale of its U.K. unit TSB--which will result in an extraordinary 2.5 billion-euro dividend payout--BBVA decided to stick with the transaction, saying it still sees value despite the risks.

BBVA had previously said that it didn't intend to improve the offer, though some analysts had estimated that a top-up would be necessary to push the deal over the line. On Monday, the BBVA board ruled out making any further improvements to the offer's price and extending the acceptance period, which opened on Sept. 8 and runs until Oct. 7.

"The revised offer is fair and not totally unexpected, and sufficiently attractive for the majority of [Sabadell] shareholders to accept, in our view," RBC Capital Markets analyst Benjamin Toms said in a note to clients.

However, Alantra analyst Francisco Riquel said a 10% bump isn't sufficiently compelling and that matching Sabadell's market price isn't a game changer.

The tender offer is temporarily suspended until the market regulator approves BBVA's new offer.

Write to Adria Calatayud at adria.calatayud@wsj.com and to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

September 22, 2025 07:45 ET (11:45 GMT)