Sabadell is now worth twelve times more than it was in the first merger attempt with BBVA.

BBVA's takeover bid for Sabadell has become a cat-and-mouse game, with both sides racing full speed ahead in the same direction: creating stock market value. Whether or not they favor exchanging their shares, Sabadell shareholders can boast of having made the most profitable investment in an Ibex-listed company in the last five years. And perhaps for much longer.

Thanks to takeover bids and defensive maneuvers, Sabadell's value is now twelve times higher than it was in November 2020, when the bank was struggling and its chairman, Josep Oliu, approached BBVA for the first time to negotiate a merger that, in those days of the pandemic, seemed amicable. BBVA had sold its business in the United States and had the potential to acquire Sabadell, but no agreement was reached for just a few hundred million. It put about 2 billion on the table and hesitated when asked for another 500 million. These were times of COVID, low interest rates, and high uncertainty.

At that time in 2020, Sabadell's share price was €0.27, and the bank's value was around €1.5 billion. Today, its market capitalization is €18.35 billion and continues to break record highs in recent years. This week, when BBVA announced it would go all the way in the takeover bid, it appreciated another 3%. The share price is now at €3.45, 141% above its April 2024 level, when a leak in London revealed that BBVA was back in the game.

Sabadell maintains that it's where it is thanks to its own merits, but the truth is that BBVA's takeover bid is a real boon for the stock market. BBVA itself argues that the Valles-based bank's shares are holding at these levels thanks to its offer. Since the worst days of the pandemic, the Ibex has risen much less, by 137%, and none of the banks come close to matching Sabadell's meteoric stock market performance.

The bank that has appreciated the most outside of the one chaired by Josep Oliu is precisely BBVA, which has multiplied its value by 6.5 times since breaking off negotiations with Sabadell at the end of 2020. It now has a capitalization of more than €95 billion and is more than capable of meeting its financial needs, with a capital surplus of more than €5 billion, which would allow it to raise its offer for Sabadell. It has just presented a strategic plan through 2028 that includes the distribution of €36 billion among shareholders, which is boosting its stock market value and serving as a lure for Sabadell investors.

The shareholders of both banks can boast of beating the entire sector and the Ibex as a whole.

Sabadell's potential upside could be even greater. Analysts these days agree that BBVA must improve its offer if it wants to acquire its prey. For now, BBVA remains silent, repeating that the limit is not set by the excess capital it has, but rather by whether the transaction creates value for its shareholders.

How much should BBVA improve the takeover bid? A variable known as the negative premium has emerged in the market to quantify this. It is the difference between Sabadell's stock market value and the takeover bid's exchange value, which is lower. It is 7%, approximately €1.3 billion.

Sabadell's stock had already increased sixfold between the initial breakup with BBVA and the second merger. During that time, Oliu entrusted management to César González-Bueno, who restructured the bank. The economic recovery and the start of interest rate hikes in July 2022 put the bank on an upward trajectory.

Its moves since the takeover bid have boosted the stock and sparked a unique bidding war between BBVA's offer and the bank's own performance. Sabadell has been announcing historic results and dividends, until this month it promised the most historic of all rewards: an extraordinary payment of €2.5 billion at the beginning of next year for shareholders who have not exchanged their shares with BBVA. This will be the result of one of the most surprising maneuvers to get rid of the bidding bank: the sale of the British subsidiary TSB to Santander, BBVA's eternal rival, for €3.3 billion.

BBVA now has the initiative and is going to play its cards. It has appealed the government's terms to the Supreme Court and could offset Sabadell's mega-dividend by bringing forward the payment in the form of an improved offer. After all, it would end up receiving the TSB dividend if it becomes Sabadell's controlling shareholder in a few months.

Analysts expect a final blow from BBVA in which the terms of the takeover bid will improve.

On August 29, Sabadell will distribute an ordinary dividend, triggering a further automatic adjustment of the offer. While each 5.3456 Sabadell shares currently entitles one BBVA share and 0.7 euros in cash, at the end of August they will be 5.5483. Whether or not Sabadell ends up in BBVA's hands, Oliu and González-Bueno have already written a page in the corporate resilience manual.