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BBVA and Sabadell break negotiations to merge due to the exchange equation

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BBVA Y Sabadell they have broken the negotiations to merge "as the parties have not reached an agreement on the eventual exchange ratio of the shares of both entities"., as reported by the bank chaired by Josep Oliu to the National Securities Market Commission (CNMV).

BBVA, for its part, explained that "the conversations regarding a potential merger operation with Banco de Sabadell have concluded without an agreement being reached". The Basque bank had already conditioned the operation to generate value for its shareholders, while Sabadell managers have tried maximize its value, as the entity absorbed.

Some days ago, Onur Genç, CEO of BBVA, took advantage of his participation in a financial forum to 'cool' market optimism (and the rise in Sabadell shares) on the corporate operation with the entity chaired by Josep Oliu.

"The Sabadell operation will compete with other options. We will not go forward if it does not provide a clear creation of value. We don't feel forced into anything. There are many opportunities out there and we have an obligation to analyze them", he pointed.

In practice, BBVA has refused to offer a higher premium over the current Sabadell price, which had soared more than 30% since both banks confirmed the negotiations. The bank's shares trade at 0.40 euros, in front of 0.27 euros from the beginning of the month.

Genç added that BBVA has just "started the process" and "is analyzing the numbers," so "this does not imply anything more than that at the moment. We have to look at the Sabadell opportunity in the context of many other things we can do with the flexibility that the sale of the subsidiary in the USA gives us ".

Bolsamanía, which already anticipated the operation of BBVA and Sabadell in early September, later published that the Basque bank could offer a 20% to 30% premium to buy its rival, but that this premium had already been discounted by the market.

And although he still had room to raise that percentage, Genç's words were undoubtedly intended prevent the market from anticipating too high a price. "The negotiations with Sabadell will not be easy, since Josep Oliu and his team will try to maximize the price, so there is still 'a lot of cloth to cut' in this process, "said Bolsamanía a few days ago, something that has finally ended up breaking the negotiation.

Nobody is aware that BBVA has strengthened its financial position after sell your business in the US for almost 10 billion euros to multiples of another era, but the bank chaired by Carlos Torres Vila I would have preferred to confirm the merger negotiations a little later, once a final price had been agreed.

In fact, before confirming the contacts, Torres himself commented that "we have a menu of options before us. There are valuable opportunities in the market where we already have franchises, so the idea is to make a very attractive buyback that we will reinvest in the business and a investment in inorganic growthas long as you provide us with a reasonable rate of return. "

"On the opportunities and consolidation of the Spanish market, we are not going to give concrete data. Certainly not today. And we'll see what happens in the future"he added.

However, pressure from the media and high of Sabadell, which shot up almost 25% that day, forced the talks to be confirmed after the market closed. Hence, Onur Genç's words tried to cool optimism, a tactic used in these types of negotiations. "We are in no rush", concluded the CEO, in a clear message to the market … and to Sabadell. In the end, the deck is broken and there will be no merger.

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