BBVA reviews the synergies of the takeover bid for Sabadell and insists it may withdraw the offer.

BBVA, one day after Banco Sabadell's shareholders' meetings to approve the sale of TSB and the macro-dividend, has updated its universal registration document to raise the risks posed by the takeover bid for the Catalan bank and to communicate for the first time that it is reviewing the expected synergies with the transaction, while reminding the public that it has the option to withdraw its offer .

The universal registration document is the one in which issuing entities communicate to the market the risks and uncertainties to which they are subject. What the Basque bank has now done is add to it to reflect the new situation regarding the Sabadell transaction.

The bank did not update this document after Pedro Sánchez's government vetoed the post-takeover merger for at least three years. Now, after Sabadell approved the divestment of its British subsidiary and the distribution of a €2.5 billion extraordinary dividend at its shareholders' meeting, it has decided to inform the market that it has placed several elements of the offer under review, taking the opportunity to incorporate the impact of the intervention by the Council of Ministers last June.

CEO Onur Genç already conveyed the idea a few days ago that, following Sabadell's meetings regarding TSB and the dividend, he would have the legal possibility of withdrawing the offer. These words have been put into writing in this supplement to acknowledge that, with the approval of the National Securities Market Commission (CNMV), they can "withdraw the offer or maintain it."

BBVA states for the first time that it cannot guarantee that "some or all of the expected benefits of the transaction will be achieved, including cost reductions and financing synergies. BBVA is reviewing the operating and financing cost synergies that could materialize during the first three years (or possibly the first five years) as a result of the takeover of Banco Sabadell and those that could materialize once the Cabinet status ceases to be in force and the merger can be carried out (in principle, after the third year following the approval of the Cabinet status or, possibly, the fifth year)."

It is recalculating the expected synergies , which have always been €850 million, including operating and financing cost savings. Until now, the bank had simply stated that the government's veto of the merger for at least three years merely delayed achieving these synergies. Sabadell, on the other hand, has insisted in recent weeks that without the merger, the synergies would be zero euros.

That thesis doesn't sound far-fetched to BBVA now, which even believes that if it were never able to complete the merger for whatever reason, "it could result in the inability to realize many of the expected benefits of the offer, including cost savings and other operational efficiencies." In any case, the bank also asserts that its intention would be to promote the merger "as soon as possible," referring to the fact that it will be at all times dependent on the central government's decisions.

Beyond this, the Basque entity also acknowledges that integrating Sabadell in a future merger "could be especially difficult and complex, could substantially divert management's time, attention, and resources, and could entail higher costs and require more time and resources than anticipated." It adds: "Specifically, difficulties could arise related to the integration of personnel, operations, and systems; the coordination of geographically dispersed corporate centers; the diversion of management and employee attention from operations and changes in corporate culture; the retention of existing customers and the acquisition of new customers; the maintenance of business relationships; and inefficiencies associated with the integration of operations. There could also be a potential negative impact from the rationalization of branch networks."

BBVA also goes further, pointing out the risks of the takeover bid not going through, in that it would be a blow to the bank's reputation. "If the offer is not settled, BBVA's share price could be affected or subject to fluctuations if the current BBVA share price reflects the expectation that the offer will be completed. Furthermore, the inability to settle the offer could negatively affect BBVA's reputation and generate adverse reactions from investors and customers, as well as negatively affect BBVA's relationship with its employees and customers," it states.