BBVA, Sabadell takeover talks collapse over price dispute

Bloomberg

Banco Bilbao Vizcaya Argentaria (BBVA) SA and Banco de Sabadell SA ended short-lived takeover talks in a disagreement over the price, setting back consolidation in a banking market hit hard by the Covid-19 pandemic.
Discussions about a purchase of Sabadell by BBVA to create the second-largest domestic lender in Spain collapsed after the two sides couldn’t agree on the exchange ratio, Sabadell said in a statement. BBVA confirmed the end of the talks in a separate filing.
BBVA initially valued Sabadell at about 2.5 billion euros ($3 billion) but the bank demanded more after its shares rallied on optimism about a Covid-19 vaccine, according to a person familiar with the conversations.. In case of an all-share transaction, Sabadell wanted at least 12% of the new company, according to two people. While BBVA raised its bid, it wasn’t enough to secure a deal.
Spain has been at the forefront of a wave of mergers that’s reshaping Europe’s financial sector as the pandemic fuels loan losses and forces lenders to cut costs. BBVA announced talks after generating billions of euros in cash from the sale of
its US business, though Chief Executive Officer Onur Genc said earlier this month the bank was also considering share buybacks and investing in growth projects as alternatives.
Talks are unlikely to resume unless BBVA makes a significantly higher offer, a third person said. Another sticking
point in the discussions was the distribution of power in the
boardroom. Sabadell wanted Chairman Josep Oliu to become a co-chairman of the combined bank, and at least three seats on the board, another person said.
A BBVA spokesman said the talks collapsed over the economic terms and that governance wasn’t an issue.
Sabadell said it will now shift its focus to developing its retail business in Spain and will analyse with its advisers “alternative strategies” for its international assets, including its UK unit TSB. TSB has proved a drag on Sabadell earnings ever since it was purchased in 2015 on
the cusp of Brexit. A poorly-managed merger of technology platforms proved costly for the bank.
Sabadell had been working with Goldman Sachs Group in recent months on options including a sale or merger, asset disposals or buying a smaller competitor, people with knowledge of the matter have said. Chairman Oliu last year raised the possibility of selling or merging TSB once it has completed a three-year cost cutting process.
At BBVA, Genc had already tempered expectations, saying last week that the bank wasn’t in a rush and would only pursue a deal that added value for shareholders.