European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>The CNMC’s provisional report requires BBVA to extend commitments to SMEs for three years instead of 18 months, a condition seen as manageable but opposed by Sabadell’s leadership.</li>
<li>BBVA's exchange offer for Sabadell values its shares at €2.37, below the market price of €2.504, implying a 5.3% shortfall, increasing pressure for BBVA to improve its bid.</li>
<li>The Spanish government opposes the takeover, and political intervention, regulatory hurdles, and a history of failed hostile bank takeovers in Europe could significantly impact the deal’s success.</li>
</ul>


The CNMC’s provisional report requires BBVA to extend commitments to SMEs for three years instead of 18 months, a condition seen as manageable but opposed by Sabadell’s leadership.
BBVA's exchange offer for Sabadell values its shares at €2.37, below the market price of €2.504, implying a 5.3% shortfall, increasing pressure for BBVA to improve its bid.
The Spanish government opposes the takeover, and political intervention, regulatory hurdles, and a history of failed hostile bank takeovers in Europe could significantly impact the deal’s success.


BBVA/Sabadell: Implications of CNMC Decision, How Much Should BBVA Raise?

<ul>
<li>Sabadell plans a €500 million share buyback to maintain stock value, reducing the attractiveness of BBVA’s exchange offer and increasing shareholder resistance to the takeover.</li>
<li>Regulatory scrutiny intensifies as BBVA-Sabadell would control 39.63% of Catalonian banking credit, raising competition concerns, particularly in SME lending and payment services.</li>
<li>The market expects BBVA to raise its offer by 10-20%, but BBVA’s CEO insists there is “no room” for improvement, making shareholder approval uncertain.</li>
</ul>


Sabadell plans a €500 million share buyback to maintain stock value, reducing the attractiveness of BBVA’s exchange offer and increasing shareholder resistance to the takeover.
Regulatory scrutiny intensifies as BBVA-Sabadell would control 39.63% of Catalonian banking credit, raising competition concerns, particularly in SME lending and payment services.
The market expects BBVA to raise its offer by 10-20%, but BBVA’s CEO insists there is “no room” for improvement, making shareholder approval uncertain.


Sabadell’s Dividend Strategy and the BBVA Takeover Bid

<ul>
<li>Lower Acceptance Threshold: BBVA reduced its tender offer threshold to 49.3%, excluding Sabadell’s 1.4% treasury shares to ensure voting rights focus on active shareholders.</li>
<li>Shareholder and Regulatory Hurdles: Retail shareholder resistance, extended antitrust reviews, and opposition from Spanish and Catalonian governments complicate the takeover.</li>
<li>Sabadell’s Defensive Moves: A €2.9 billion shareholder return plan, potential treasury share expansion to 10%, and Zurich’s 3% stake further reduce the offer's likelihood of success.</li>
</ul>


Lower Acceptance Threshold: BBVA reduced its tender offer threshold to 49.3%, excluding Sabadell’s 1.4% treasury shares to ensure voting rights focus on active shareholders.
Shareholder and Regulatory Hurdles: Retail shareholder resistance, extended antitrust reviews, and opposition from Spanish and Catalonian governments complicate the takeover.
Sabadell’s Defensive Moves: A €2.9 billion shareholder return plan, potential treasury share expansion to 10%, and Zurich’s 3% stake further reduce the offer's likelihood of success.


BBVA’s Bid for Sabadell: A Tough Road Ahead

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Thematic (Sector/Industry)

<ul>
<li>The UBS acquisition of Credit Suisse includes the write-off of CHF15.8bn (USD17bn) of Additional Tier 1 (AT1) bonds, despite there being residual equity value for CS shareholders in the deal</li>
<li>AT1s are the most junior, loss absorbing of bonds; precedent exists for the zeroing of AT1s in Spain’s Banco Popular 2017 failure, but importantly this also included shareholders being zeroed</li>
<li>The Credit Suisse AT1 write-off is by far the biggest so far and this unconventional treatment of shareholders versus junior bondholders should lead European banks’ cost of equity to rise</li>
</ul>


The UBS acquisition of Credit Suisse includes the write-off of CHF15.8bn (USD17bn) of Additional Tier 1 (AT1) bonds, despite there being residual equity value for CS shareholders in the deal
AT1s are the most junior, loss absorbing of bonds; precedent exists for the zeroing of AT1s in Spain’s Banco Popular 2017 failure, but importantly this also included shareholders being zeroed
The Credit Suisse AT1 write-off is by far the biggest so far and this unconventional treatment of shareholders versus junior bondholders should lead European banks’ cost of equity to rise


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>Predicting binary events based on regulatory action or inaction is not ideal. Decide Monday or Tuesday to either sell <a href="https://www.smartkarma.com/entities/shibaura-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:12704:1" rel="noopener">Shibaura Electronics (6957 JP)</a> in the market or tender.</li>
<li>
<a href="https://www.smartkarma.com/entities/krungthai-card-pcl" target="_blank" data-smartkarma-citation="entities:20097:1" rel="noopener">Krungthai Card (KTC TB)</a> is still a buy as latest pledged shares numbers fall to 2.3% of shares outstanding, down from 16.3% in May.</li>
<li>
<a href="https://www.smartkarma.com/entities/wilmar-international-ltd" target="_blank" data-smartkarma-citation="entities:172:1" rel="noopener">Wilmar International (WIL SP)</a> appears "cheap" to 90%-held <a href="https://www.smartkarma.com/entities/yihai-kerry-arawana-holdings-c" target="_blank" data-smartkarma-citation="entities:33230:1" rel="noopener">Yihai Kerry Arawana Holdings C (300999 CH)</a>; however recent implied stub figures have rolled over</li>
</ul>


Predicting binary events based on regulatory action or inaction is not ideal. Decide Monday or Tuesday to either sell Shibaura Electronics (6957 JP) in the market or tender.

Krungthai Card (KTC TB) is still a buy as latest pledged shares numbers fall to 2.3% of shares outstanding, down from 16.3% in May.

Wilmar International (WIL SP) appears "cheap" to 90%-held Yihai Kerry Arawana Holdings C (300999 CH); however recent implied stub figures have rolled over


Last Week In Event SPACE: Shibaura Electronics, Krungthai Card, Wilmar, First Pac, Fonterra

Spain

Banco de Sabadell SA attracts deposits and offers commercial banking services. The Bank offers mortgage, consumer, student, and building improvement loans, private banking services, and insurance, and sponsors Visa credit cards.  The Bank operates branches throughout Spain, elsewhere in Europe, the Caribbean, the Americas, and Asia.

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Banco De Sabadell SA (SAB SM)

BBVA/Sabadell: Implications of CNMC Decision, How Much Should BBVA Raise?

CNMC requires BBVA to extend commitments to SMEs for 3 years, Sabadell's leadership opposes. BBVA's offer for Sabadell undervalues shares,...

Jesus Rodriguez Aguilar

Sabadell’s Dividend Strategy and the BBVA Takeover Bid

Sabadell's dividend and share buyback plan complicates BBVA's takeover bid, facing regulatory concerns and uncertain shareholder approval.

Jesus Rodriguez Aguilar

BBVA’s Bid for Sabadell: A Tough Road Ahead

BBVA faces challenges in Sabadell takeover as lower acceptance threshold, shareholder resistance, and defensive moves by Sabadell complicate the...

Jesus Rodriguez Aguilar

AT1 Bonds; Life After Credit Suisse

The CS AT1 write-off due to UBS's acquisition is an unconventional action on bondholders versus shareholders, implying a rising banks' cost of...

Victor Galliano

Last Week In Event SPACE: Shibaura Electronics, Krungthai Card, Wilmar, First Pac, Fonterra

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

BBVA/Sabadell: Implications of CNMC Decision, How Much Should BBVA Raise?

​CNMC requires BBVA to extend commitments to SMEs for 3 years, Sabadell's leadership opposes. BBVA's offer for Sabadell undervalues shares,...

Jesus Rodriguez Aguilar

Sabadell’s Dividend Strategy and the BBVA Takeover Bid

​Sabadell's dividend and share buyback plan complicates BBVA's takeover bid, facing regulatory concerns and uncertain shareholder approval.

Jesus Rodriguez Aguilar

BBVA’s Bid for Sabadell: A Tough Road Ahead

​BBVA faces challenges in Sabadell takeover as lower acceptance threshold, shareholder resistance, and defensive moves by Sabadell complicate the...

Jesus Rodriguez Aguilar

AT1 Bonds; Life After Credit Suisse

The CS AT1 write-off due to UBS's acquisition is an unconventional action on bondholders versus shareholders, implying a rising banks' cost of...

Victor Galliano

Last Week In Event SPACE: Shibaura Electronics, Krungthai Card, Wilmar, First Pac, Fonterra

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

CNMC requires BBVA to extend commitments to SMEs for 3 years, Sabadell's leadership opposes. BBVA's offer for Sabadell undervalues shares,...

Sabadell's dividend and share buyback plan complicates BBVA's takeover bid, facing regulatory concerns and uncertain shareholder approval.

BBVA faces challenges in Sabadell takeover as lower acceptance threshold, shareholder resistance, and defensive moves by Sabadell complicate the...