BBVA Hikes Bid for Banco Sabadell 10% to €19.5bn All-Share Deal - Swap 1:4.8376, Sellers to Hold 15.3%

BBVA (BME: BBVA) has bumped up its offer for Banco Sabadell (BME: BNDSF) by 10%, turning the bid into an all-share proposal that pegs Sabadell at roughly €19.5 billion.

The new swap ratio: one BBVA share for every 4.8376 Sabadell shares. That works out to about €3.39 a Sabadell share and - BBVA says - the highest implied price for Sabadell in more than a decade. For context, the target's valuation stood near €12.2 billion before merger talks became public on April 29, 2024. If more than half of Sabadell's voting rights accept the deal, the all-stock structure would be tax neutral in Spain.

Selling shareholders would emerge with a 15.3% stake in BBVA (BME: BBVA). BBVA (BME: BBVA) projects the tie-up would lift Sabadell's earnings per share by about 41% versus remaining independent, and it says the transaction is accretive to BBVA's own EPS from year one - BBVA's estimate: roughly a 3% bump on a standalone basis.

On capital and returns, BBVA (BME: BBVA) forecasts a return on invested capital of around 17%. The hit to its CET1 ratio at closing is estimated at 21 basis points negative, narrowing and flipping to a 40bp positive effect after the planned sale of Sabadell's UK unit TSB and payment of an extraordinary dividend that Sabadell approved.

Regulatory formalities are underway. The acceptance window is paused while Spain's CNMV reviews a supplement to the prospectus that reflects the revised terms. Once the regulator signs off, the offer period will resume for the remaining days up to the original 30-day span. BBVA (BME: BBVA) also confirmed that shareholders who already accepted the initial exchange will get the improved terms.

From a market perspective, the premium on the table now sits well above the average seen in comparable European bank deals at announcement. BBVA (BME: BBVA) argues the merger creates scale, boosts annual financing capacity by about €5.4 billion and includes commitments to back small businesses and the self-employed as part of remedies with competition authorities. Integration risks, regulatory clearance, the timing and proceeds of the TSB sale, and whether the acceptance rate clears the 50% tax-neutral threshold are the obvious milestones that will move the tape.

Plenty of moving parts. Will the CNMV clear the supplement quickly and will the TSB sale close on the timetable BBVA (BME: BBVA) expects?