César González-Bueno, CEO of Banco Sabadell, has strongly criticized the proposed merger with BBVA, calling it illogical and lacking in clear financial justification. “I think this transaction is going to derail“, he said.
In a recent interview with CNBC, González-Bueno outlined several key concerns regarding the potential takeover by the Spanish banking giant BBVA, which has drawn both social and political opposition. His comments reflect growing resistance to the merger, with over 70 Spanish entities, including trade unions and employer associations, speaking out against the deal.
Lack of Financial Incentives and Negative Synergies
González-Bueno emphasized that the merger made no financial sense, highlighting the absence of a clear price or dividend advantage for Sabadell shareholders. “The dividends that Sabadell is going to pay in the foreseeable future are clearly higher than those of the merged entity,” González-Bueno pointed out, questioning why the merger should proceed under these conditions. Furthermore, he argued that the potential synergies of the merger were questionable, suggesting that the excessive concentration of the Spanish banking market could hinder any positive outcomes.
One of the primary concerns raised by González-Bueno was the potential loss of customers, with 46% of Sabadell’s customers indicating that they would consider switching to a different bank should the merger go ahead. This statistic highlights the risk of significant customer attrition, which would directly impact the merged entity’s revenue prospects. González-Bueno underscored the fact that the merger was being seen as more of a distraction rather than a strategic move for growth and consolidation.
Government Involvement and Potential Remedies
In light of the growing opposition, González-Bueno also addressed the role of the Spanish government in the merger negotiations. Spanish Economy Minister Nadia Calviño has voiced concerns over the deal, particularly regarding its implications for competition and employment. González-Bueno echoed these concerns, noting that the merger had become a politically charged issue and that social opposition had grown significantly.
The chairman of Banco Sabadell, Josep Oliu, also weighed in on the issue, urging the government to provide clarity on any conditions it may impose on the takeover, Reuters reported. Under Spanish law, while the government cannot stop a merger from being proposed, it does hold the final say on whether such a deal can proceed. Oliu stressed that the government would assess the merger’s social and economic impact, and he suggested that BBVA would need to present a significantly different value proposal to address the concerns of both Sabadell’s board and the broader public.
Opposition from Shareholders and the Path Forward
The merger’s future also depends on the decision of Sabadell’s shareholders, who will vote on whether to accept BBVA’s offer. With around half of Sabadell’s shares held by retail investors, their approval or rejection will be crucial in determining the outcome. Sabadell’s leadership, including González-Bueno, does not expect the offer to receive the backing of small shareholders, and they have warned that institutional investors like BlackRock, Dimensional, and Vanguard are unlikely to make a decision until all the details of the merger proposal are clear.
Oliu made it clear that if BBVA’s offer succeeded, it could result in significant customer and business losses, which would likely lead to negative revenue synergies. As a result, he expressed skepticism regarding the long-term benefits of the merger, particularly as it pertains to the Spanish banking market.
The Role of Spanish Banks in European Markets
While the merger between BBVA and Sabadell has dominated headlines, both Oliu and González-Bueno highlighted that Spanish banks must focus on strengthening their positions within Europe rather than looking for consolidation purely within the domestic market. Sabadell, for instance, has made significant strides in increasing its market capitalization and positioning itself as a leader on the Spanish stock exchange. The bank’s focus on technological innovation and high employee engagement has fueled its positive performance in recent years, suggesting that further consolidation may not be the most strategic move for Sabadell.
In the broader context of the European banking sector, both Sabadell executives agreed that Spanish banks should consider positioning themselves within the larger European market, particularly as they look to expand beyond Spain and into emerging markets. González-Bueno noted that BBVA’s reliance on emerging markets such as Mexico and Turkey presented a different strategic focus compared to Sabadell’s approach.
