BBVA shares rise after Sabadell rejects its merger proposal

Madrid. Shares in Spanish bank BBVA BBVA.MC rose as much as 1.9 percent on Tuesday morning after Sabadell SABE.MC rejected what it described as an unsolicited takeover proposal from BBVA.

At 8:05 GMT, shares of BBVA, the second largest Spanish bank by market value, rose 1.5 percent, while those of the fourth largest bank, Sabadell, fell 1.7 percent.

Sabadell said on Monday that its board believed BBVA’s proposal significantly undervalued its potential and growth prospects. BBVA said it regretted the Sabadell council’s decision, without giving any clue about its next move.

BBVA could now withdraw, raise its offer or launch a hostile takeover. A spokesman declined to comment.

Spanish broker Alantra said it did not expect BBVA to improve its offer or turn hostile.

“We rule out BBVA becoming hostile (…) given that management will destroy its record of financial discipline and that around 50 percent of Sabadell shareholders are retail investors, who would largely follow the board’s decision in any case. “, said.

The broker also said he believed BBVA would not switch to a cash offer as it was proposing a friendly merger and paying cash would be incompatible with that.

RBC Capital, however, said BBVA would probably have some room for maneuver on the price and “Sabadell probably has not completely closed the door on future negotiations, although the two sides currently seem very far from finding a middle ground.”

Last week, BBVA proposed offering one newly issued BBVA share for every 4.83 Sabadell shares, which represents a 30 percent premium over Sabadell’s closing price on April 29 and a valuation of about 12 billion euros (12.9 billion dollars).

Since then, Sabadell shares have risen around 8.8 percent, while BBVA’s have fallen 9.7 percent, reducing the value of the proposal to about 11 billion euros.