BBVA Petitions the Supreme Court to Challenge Restrictions Imposed by the Government on Sabadell
The Spanish banking giant, BBVA, has appealed to the Supreme Court against conditions imposed by the Spanish Government that delay the full merger and integration of Banco Sabadell. These conditions require the two banks to operate independently for at least three years after the takeover.
The Government's action is intended to mitigate potential risks to employment and other concerns. However, BBVA argues that these conditions hinder the integration necessary to achieve anticipated cost savings and other synergies from the deal. The imposed delay complicates and postpones the operational merger benefits originally expected, such as projected joint cost savings of around 850 million euros.
BBVA's CEO, Onur Genç, has stated that the merger process will continue, and the exchange process will begin in early September, following the approval of the CNMV for the operation's prospectus. The only remaining question is whether BBVA has requested a suspensive appeal of the Government's decision, which would temporarily halt the takeover until the court rules on the case.
The European Commission has initiated proceedings against Spain for these conditions, asserting that the Spanish government's extensive powers to intervene in such mergers contradict EU regulations and overstep the roles of European and national banking supervisors.
Despite the conditions, BBVA continues with the takeover offer but is reassessing expected financial synergies and the offer terms in light of these regulatory hurdles and recent developments like Sabadell’s U.K. unit sale.
The Ministry of Economy defends the Government's action in the BBVA-Sabadell merger, stating it has acted in accordance with national legislation. The Minister of Economy, Carlos Cuerpo, has emphasized that the Government has limited itself exclusively and very strictly to what the law allows. The Government's regulation on mergers has been in effect since 2007 and has been applied numerous times since then.
BBVA had initially considered the possibility of appealing the Government's decision due to its interpretation that the law does not allow the Executive to toughen conditions. The Government authorized BBVA's takeover bid for Sabadell, but imposed conditions that the two entities maintain their "juridical personality and separate assets, as well as autonomy in their activity" for three years.
In summary:
| Conditions Imposed by Spanish Government | BBVA’s Reason for Appeal | |------------------------------------------------------|-----------------------------------------------------| | Full merger and integration delayed at least 3 years | Integration ban hinders cost-saving synergies | | Banks must remain separate entities during this time | Delay impairs value creation and operational efficiency | | Concern over employment risks | Legal challenge to overturn conditions to enable merger |
