Spain Prime Minister Defers to Watchdog on BBVA’s Sabadell Bid

(Bloomberg) -- Spanish Prime Minister Pedro Sanchez withheld judgment on the merits of the proposed takeover of Banco Sabadell SA by larger rival BBVA SA, even though his government previously expressed strong opposition to the banking deal.

“What I want to see is a strong financial system in Spain, let’s wait and see what our competition authorities say in this regard,” Sanchez said in an interview with Bloomberg TV at the World Economic Forum in Davos on Wednesday when asked about his stance on the transaction. He continued to defer to the watchdog despite several follow-up questions during the interview.

The bid is currently under review by Spanish antitrust agency CNMC. The agency’s decision in November to open a second, more in-depth stage of the assessment was seen as negative for BBVA as it increases the likelihood of stringent remedies.

BBVA’s unsolicited bid in May to acquire Sabadell is being followed closely across Europe as it will indicate the likelihood of authorities allowing domestic consolidation, as well as the impact of mergers on lenders’ performance. The offer has faced widespread opposition in Spain, both from the central administration and regional authorities in Catalonia, where Sabadell is based.

Banco Sabadell said earlier on Wednesday that its board will meet to discuss a proposal to locate its registered office again in its namesake town of Sabadell as the lender seeks to muster political support in its traditional home base for the fight against the hostile bid.

The government has previously said that a takeover by BBVA would damage banking competitiveness, harming both retail clients and small and medium-sized companies. Sabadell has one of the largest market shares in the SME sector, which is one of the reasons why it’s being targeted by BBVA.

“We have to take into consideration different aspects,” Sanchez said in Wednesday’s interview. “In Spain we have a large number of SMEs.”

Although the government cannot block BBVA from buying a part or all of Sabadell, it can block a full-on merger. This means BBVA could potentially end up owning a stake in its rival without fully taking control.

Spain is not alone in its resistance to banking consolidation. The German government has said it opposes a potential takeover of Commerzbank AG by UniCredit SpA. A separate attempt by UniCredit to buy Banco BPM SpA has also been met with irritation among some government officials in Rome.

In contrast, French President Emmanuel Macron in May said he would be in favor of a major French bank being taken over by a European Union rival.

--With assistance from Thomas Gualtieri.

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