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Spanish bank BBVA has suffered a setback in its €11bn hostile bid for local rival Sabadell as the country’s antitrust regulator announced it would subject the deal to a more rigorous competition review.
The CNMC, Spain’s antitrust regulator, said on Tuesday that “in view of circumstances of the transaction and its potential impact on the maintenance of effective competition” it would submit the deal to what it calls a phase 2 review.
The regulator’s decision will further delay any advance in the deal, which would be the largest European bank takeover for several years.
Antitrust approval is one of the biggest hurdles BBVA faces in its pursuit of its smaller rival. It also needs the authorisation of Spain’s Socialist-led government, which is opposed to the deal.
The CNMC’s move will help Sabadell, which does not want to be subsumed by the larger lender and had warned that the regulator could request remedies that include forcing BBVA to offload highly profitable small business clients.
Sabadell said: “The decision confirms the complexity of the hostile takeover bid launched by BBVA, requiring a more in-depth study of the consequences that this transaction would have on competition in the Spanish financial system.”
A combination of BBVA and Sabadell, which has Catalan roots, would create the second-biggest player in Spain’s loan market, leapfrogging Santander.
BBVA had wanted to launch a formal tender offer to Sabadell shareholders before the end of this year, but the CNMC’s decision makes that unlikely.
BBVA said: “[We] will continue to work constructively with the CNMC to finalise as soon as possible the agreement on remedies and the approval of the file.”
The CNMC said its initial conclusion was that the takeover would affect banking and payment services in Spain as well as insurance, pension plans and asset management.
But it also said: “The opening of the second phase does not prejudge the final conclusions that the CNMC may reach in relation to the operation.”
BBVA views Sabadell’s prized small and mid-sized client base in Spain as the most attractive part of its business. Carlos Torres, the BBVA chair driving the bid, has expressed confidence that it will not be derailed by competition objections.
Carlos Cuerpo, the Spanish economy minister who is fronting government opposition to the deal, has expressed concern that it would reduce competition in banking and create financial stability risks by leaving the country with just three giant banks.
Sabadell’s board rejected a friendly offer from BBVA in May and the larger bank then returned with a hostile bid on the same terms.
