Unsurprisingly, the National Commission of Markets and Competition (CNMC) is poised to issue its first ruling on BBVA’s planned absorption of Sabadell, with Tuesday, or at the latest Wednesday, the timeline for a decision. The ruling is expected to be communicated, in principle, via a market-close press release. Officially, the competition chamber of the council has three paths: approve the merger, approve it with specific commitments from BBVA, or move the case to phase two analyses designed for more complex operations. People familiar with the process say the latter is the option most likely to prevail. [CNMC sources]
The competition chamber will meet on Tuesday to review the report and the resolution draft that the agency’s technical staff will present. Some sources say the Competition Directorate does not view the deal as a notable threat to the proper functioning of the banking market and leans toward approving it with commitments from BBVA, as was done in the CaixaBank-Bankia case three years ago. Yet the chamber, led by the agency’s president, Cani Fernández, and commissioners Maria Jesús Martín, Bernardo Lorenzo, and Xabier Ormaetxea, appears inclined to extend the analysis. [CNMC sources]
Should this path be confirmed, the process would extend noticeably, with estimates suggesting a timeline reaching into the second quarter of 2025 at the earliest, significantly increasing uncertainty around the operation. It would also leave open the possibility that the government, which opposes the integration, could impose additional conditions beyond those the CNMC might set at the end of phase two. The 2007 Law on the Defense of Competition enables the government to act for public interest reasons separate from the defense of competition. [Law 2007; government sources]
Better for Sabadell
Thus, this scenario would represent the Sabadell leadership’s preferred outcome, as Sabadell has opposed the merger, while BBVA’s leadership would find it worrisome. The Basque-origin bank has been asserting for six months that it expects CNMC to approve the operation in phase one with workable commitments from BBVA to avoid adverse effects on competition in certain territories and business lines, following the CaixaBank-Bankia precedent. But Sabadell has insisted there are reasons to push for phase two and has warned that doing so could derail the deal. [BBVA statements; Sabadell remarks]
The CNMC’s decision, whatever it is, could play a critical role in the deal’s fate. Whether the review ends in phase one or phase two, any requirements imposed by the CNMC or the Government could economically disincentivize BBVA from continuing or push Sabadell’s owners toward selling. Moreover, the takeover framework allows the Basque bank to walk away if, before the acceptance window closes, the CNMC has not issued a ruling or if it conditions the concentration on certain requirements. [Takeover framework citations]
Difficult Balance
The CNMV has signaled that, even without an obligation, it could wait for the CNMC to rule in phase one before approving the takeover prospectus and opening the acceptance period for shareholders. Doubts remain about this approach if the case moves to phase two, especially in light of the recent announcement that president Rodrigo Buenaventura will not seek a two-year extension and will move to IOSCO in January. [CNMV statements]
“A clash exists between two legitimate public policy objectives. On one side, Sabadell’s shareholders deserve timely access to the offer to decide. On the other, if the imposed conditions become overly onerous and alter the likely outcome of the group, the information available to shareholders to form a proper view could be markedly different,” Buenaventura noted a few weeks ago. [Buenaventura remarks]
The chief executive of BBVA, Onur Genç, recently reminded markets that the bank has at least two exit routes available. One is if CNMC imposes conditions that it considers excessive or unacceptable, in any phase. The other is a legal option to withdraw its offer if the CNMC has not spoken before the closing of the acceptance window. In any case, Genç rejected these as central scenarios and said the bank would push forward with its attempt to acquire Sabadell even if the CNMC decides to push the process into phase two: “We would not agree, it would not be justified, but we would continue working with them.” [BBVA statements]
Regardless of the precise path chosen, the CNMC’s pronouncement is expected to be a lynchpin for the deal’s fate. The decision could influence whether the operation proceeds in earnest or loses momentum, with potential effects on valuations and the willingness of Sabadell’s holders to sell. [CNMC evaluations]