Madrid creates obstacles to BBVA PAO for Sabadell

Spain’s government is opposing a hostile takeover bid by Spanish bank BBVA for the Spanish multinational financial services company Sabadell that provides a wide range of banking products and services for SMEs and HNWIs.

Banco Sabadell operates in Portugal with offices in both Lisbon and Porto where it provides banking services to both Portuguese and Spanish companies with business interests in Portugal.

The Spanish government is now demanding that BBVA maintains Sabadell as an independent entity for three years; a period that may be extended.

The government’s objections to the takeover include concerns that it would give more power to a Madrid-based bank, making capital even more prominent compared to other large Spanish cities.

Among the conditions for allowing the takeover to go ahead are job protection and territorial cohesion.

However, financial analysts believe that with so many restrictive terms demanded by the government, BBVA should walk away according to Bloomberg.

On Monday, BBVA’s CEO, Onur Genç said it would drop the takeover bid if the Spanish government’s terms proved too harsh.

Spain’s Minister for the Economy, Carlos Cuervo said: “The government has authorised the BBVA and Sabadell deal on the condition that, for the next three years, they remain separate entities and maintain separate assets, as well as preserve autonomy in the management of their activities.”

A Public Acquisition Offer (PAO), also known as a public takeover bid, is a formal offer made by a company (the bidder) to acquire a significant portion, or all, of the shares of another company (the target). This offer is typically made to all shareholders of the target company and is usually done with the intention of gaining control of the target company.