Where Does BBVA's Sabadell Acquisition Stand?

BBVA’s prolonged attempt to acquire Banco Sabadell will be extended as Spanish regulators initiate an in-depth examination of the €9.83 billion (US$10.4 billion) offer. The bid, which has already lost value amid market volatility driven by political uncertainty, now faces additional hurdles as the Spanish Competition Authority (CNMC) moves into a “phase 2” investigation.

BBVA's acquisition of Banco Sabadell was announced in May of this year as part of BBVA’s strategy to strengthen its domestic market position and expand its retail banking presence, particularly in light of increasing competition and digital transformation in the banking sector. The takeover has received mixed reactions, with some analysts seeing potential synergies and cost efficiencies, while others are concerned about regulatory hurdles and integration challenges, according to Business Insider. The acquisition has caused fluctuations in stock prices for both banks.

The CNMC’s decision to launch a second phase of review gives the authority at least three more months to assess the hostile takeover proposal. BBVA, Spain’s second-largest bank, had hoped for swift approval with minimal remedies but now faces the possibility of stricter regulatory requirements. Despite these challenges, BBVA continues to stress the strategic importance of the merger, which aims to diversify its exposure away from emerging markets.

“We will continue to work constructively with the Spanish competition authority to finalize an agreement on remedies as soon as possible,” said Onur Genç, CEO, BBVA, in a press release. “BBVA will continue to work closely with the authorities to finalize as soon as possible any commitments that may be necessary to alleviate any concerns they may have and get the transaction approved,” he stressed. However, he added that any imposed conditions must be “non-structural,” citing the precedent set by the Caixa-Bankia merger.

BBVA remains adamant that the combined entity would not dominate the Spanish banking sector, but government opposition raises concerns that a more stringent remedy package, potentially involving asset sales, could be demanded. Analysts from the brokerage Alantra have already warned that such measures could result in revenue losses and reduce the anticipated synergies.

The CNMC’s ruling will also be crucial for Spain’s National Securities Market Commission (CNMV), which must approve the bid before it can be presented to Sabadell shareholders. Rafael Alonso, analyst, Bankinter, observed that the shrinking premium on BBVA’s offer—now down to approximately 5% from an initial 30%—has weakened the appeal for retail investors, who comprise nearly half of Sabadell’s shareholder base. “What they really have to analyze is the current premium and the risks associated with investing in an entity heavily exposed to Mexico,” he explained.

The market’s reaction highlights broader concerns tied to BBVA’s operations in Mexico, a region that accounts for more than half of the bank’s profit. Following Donald Trump’s election victory, BBVA’s share price fell by 7%, contributing to an 18% decline since the deal’s announcement in April. Experts are concerned that potential protectionist policies under the Trump administration could worsen these financial pressures. "The more protectionist the Trump presidency, the worse it will be for BBVA," said Germán López, a finance professor, IESE Business School.

Despite these setbacks, many investors remain focused on BBVA’s robust positions in Mexico and Turkey. The continued parallel movement of BBVA and Sabadell stock prices suggests the market sees a “reasonable chance” for the deal’s success, according to Alonso.

However, Genç made it clear that BBVA could walk away from the deal if the imposed conditions were deemed “unacceptable.” The bank submitted a confidential letter of remedies to the CNMC in an attempt to address competition concerns, with Genç arguing that the merger should have been approved in the first review phase. “If it goes to phase 2, we would not agree with it, but we will continue to work with them,” he said.

BBVA executives reiterated that no offer improvements are planned.