BBVA investors back €10bn share issue for lender’s hostile bid for Sabadell

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BBVA shareholders have approved a €10bn share issue to facilitate the Spanish lender’s hostile bid for Banco Sabadell, clearing a hurdle for the biggest transaction in European banking this year.

At an extraordinary meeting on Friday, 96 per cent of BBVA investors gave executive chair Carlos Torres the go-ahead to issue the stock he wants to offer Sabadell shareholders in an all-share tender, which is likely to be launched towards the end of this year.

The contentious bid by BBVA, which has a market value of €55bn, is opposed by Sabadell, the owner of UK high street bank TSB, which has deep roots in Catalonia and has already rejected a friendly approach on the same terms.

The bid also faces other obstacles, including a Spanish antitrust review and the opposition of Spain’s government, which has vowed to prevent BBVA from merging the banks even if it succeeds in acquiring Sabadell.

Torres, who has pinned his own fortunes to the deal, told shareholders the transaction was “enormously attractive” and an assured bet on Spain and its small businesses, a client base where Sabadell is strong.

“With the integration of the two businesses, we will gain scale . . . We will become the second-largest bank in terms of loan market share at the national level and strengthen our capacity to compete in the domestic market,” Torres said.

A person close to Sabadell said the result of the share issue vote “has no bearing on the deal” and was no surprise. “There are still so many gaps in what BBVA is proposing and so many uncertainties overhanging it. This is a long process, and ultimately Sabadell shareholders will decide, along with the regulators and government,” the person said.

BBVA plans to offer one of its newly issued shares for every 4.83 Sabadell shares, meaning investors in the smaller bank would end up owning 16 per cent of a combined entity. BBVA’s bid initially valued Sabadell at €12bn but it has fallen in value because the would-be acquirer’s share price has dropped.

Highlighting the 96 per cent support for the share issue, BBVA noted with optimism that almost half of BBVA’s shareholders also owned shares in Sabadell.

But in a letter to Sabadell shareholders on Thursday, its chair Josep Oliu wrote that approval for BBVA’s capital raising would not “imply any decision [on the takeover bid] on the part of the shareholders who hold shares in both institutions”.

Institutional Shareholder Services, an influential proxy adviser, recommended that investors vote in favour of the share issue.

But it noted that “the omission of support from Sabadell’s board [for the bid] and the pending regulatory approvals create uncertainties about the success of the offer and the subsequent integration and value creation for the combined group”.

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