CNMC Moves BBVA-Sabadell Merger into Phase Two Review
Good news for Sabadell and a setback for BBVA as of Tuesday the National Market and Competition Commission of Spain decided to move the attempt by the Catalan bank to be absorbed by the BBVA group into the second phase of analysis rather than approving it now on the condition of commitments, as BBVA had publicly anticipated for months. The decision means a longer process and more uncertainty for the outcome of the takeover bid. It also opens the door for the government, which has opposed the deal, to place obstacles in certain scenarios to try to derail it. For readers in North America, this case shows how regulators scrutinize big financial consolidations and how government interests can influence outcomes in highly regulated markets.
The CNMC competition department has three options on the table: authorize the concentration, approve it with commitments from BBVA, or send the case to the second phase, a stage designed for operations that may hinder competition in all or part of the national market. In recent weeks, several sources suggested the last option had the best chances, even if it faced technical staff concerns, and that is what has occurred.
The CNMC’s Directorate of Competition did not see a notable risk to the proper functioning of the banking market and favored approval with some commitments to mitigate competition concerns in certain businesses and regions that BBVA had proposed. This approach was similar to what happened with CaixaBank and Bankia three years ago. Yet the competition chamber, composed of CNMC President Cani Fernández and the board members Maria Jesus Martin, Bernardo Lorenzo, and Xabier Ormaetxea, leaned toward prolonging the analysis given the circumstances of the operation and its potential impact on maintaining effective competition.
Tres Meses and Third-Party Involvement
Under the relevant competition law, the CNMC will now have up to three additional months to continue the analysis, though the timeline can extend in practice if the regulator issues information requests. This phase opens the door to third parties with a legitimate interest. The Directorate will prepare a concise note on the concentration, which after resolving confidential aspects, will be published and shared with potentially affected individuals or entities and with the Consumer and User Council, inviting submissions within ten days.
Sabadell and other interested third parties, as well as BBVA, will be able to present arguments and provide more information as needed. In addition, a non-binding preliminary report will be requested from the most affected autonomous communities, such as Catalonia and the Valencian Community. At BBVA’s request, a hearing before the CNMC could be held. The council will then decide whether to authorize the concentration, approve it with commitments or conditions, or prohibit it.
Estimates suggest the decision could come no earlier than the second quarter of the coming year. If the CNMC prohibits the deal or imposes requirements, the Government would have up to 45 additional days to impose further conditions for reasons of general interest beyond competition defense, such as ensuring alignment with sectoral regulatory objectives. The minister of Economy has argued against the operation, making a delay seem plausible.
Better for Sabadell
In this light, the scenario looks favorable to Sabadell’s leadership, which has resisted the merger, and worrying for BBVA. The CNMC’s stance can be decisive for the deal’s fate. Regardless of the phase, any conditions set by the CNMC or the Government could deter BBVA economically from continuing or could pressure Sabadell’s owners to sell their shares. The takeover law also allows the acquiring bank to back out if, before the end of the acceptance period, the CNMC has not ruled or has conditioned the concentration in a way unacceptable to the buyer.
The CNMV had already signaled that it might wait for the CNMC’s phase one outcome before approving the draft offer document and starting the acceptance period for shareholders. There is more doubt about whether it will do so now that the deal has moved to phase two, especially after the president of the CNMV, Rodrigo Buenaventura, announced he will step down and move to a role with the IOSCO in January.
The BBVA chief executive, Onur Genç, noted that the bank has at least two exits from the deal. First, if the CNMC imposes conditions that BBVA cannot accept, regardless of the phase, and second, if the regulator has not issued a ruling by the close of the acceptance period. He stressed that these are not central scenarios and affirmed that the bank would continue working with the regulator even if the operation advances to phase two.