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BBVA’s Sabadell Bid Hits Stumbling Block as Agency Delays Ruling

(Data compiled by Bloomberg)

(Bloomberg) -- BBVA’s takeover of Banco Sabadell SA faces greater uncertainty after a Spanish regulator said it needs more to time for a decision on whether the bid can go ahead. 

Spain’s antitrust agency CNMC late Tuesday effectively delayed a ruling for several months by initiating a deeper bid assessment, known as Phase 2. The decision, which confirmed a previous Bloomberg News report, will allow external parties to submit opinions and extend the review by months before CNMC ultimately rules.

The CNMC decision has “negative implications” for the likelihood of BBVA’s offer succeeding, Caixabank analyst Carlos Peixoto wrote in a note. That’s because it prolongs the process while BBVA is facing an uncertain outlook in Mexico, which is one of its key markets. The extension also potentially allows the Spanish government “to have some influence” on the outcome, Peixoto said. 

BBVA’s share price was trading 0.5% higher in Madrid at 10:17 a.m. while Sabadell’s was up 0.6%. 

BBVA, whose formal name is Banco Bilbao Vizcaya Argentaria SA, in May launched a hostile acquisition attempt for Sabadell. The deal, which would create a new Spanish banking behemoth and balance BBVA’s strong dependence on income from emerging markets, needs approval from various domestic and international regulators before it can be presented to Sabadell’s shareholders, with CNMC’s decision being one of the most important. 

Sabadell’s management has rejected the offer as too low. BBVA also faces push-back from the government, which has raised concerns about market concentration but has limited powers to block a deal. What the government can do is block a merger.

BBVA has said that a lengthy process is bad for its plans, with Chairman Carlos Torres having said that time was the main threat to the takeover. 

CNMC’s Phase 2 decision means that, if the deal is finally approved, the government will subsequently be allowed to impose measures to ensure competition in the sector. Spanish Economy Minister Carlos Cuerpo has previously said a deal would hurt competition in the country.

The Phase 2 is now scheduled for three months though there’s a chance it could take longer, with similar assessments of past deals taking as long as seven months, Alantra analyst Francisco Riquel said in a note. 

“We expect the CNMC to impose hard remedies on BBVA-SAB after Phase 2,” Riquel said in the note. “Hard remedies could very likely imply asset disposals, and this in turn means revenue losses and thus negative synergies.”

--With assistance from Rodrigo Orihuela.

(Updates with share price movement in fourth paragraph.)

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