(Bloomberg) -- Banco Sabadell SA’s chief executive officer stepped up his criticism of the hostile takeover bid from BBVA SA, detailing why he thinks the savings promised by the larger rival won’t materialize.
BBVA’s plan to cut annual costs by €750 million ($815 million) while only spending €1.45 billion to achieve those savings is “unfeasible,” Cesar Gonzalez-Bueno said in an interview in Madrid. He also said that Sabadell’s annual technology costs of just €400 million imply BBVA would need to carry out substantial job reductions to fulfill its pledge, despite statements to the contrary from the other bank.
BBVA made a hostile approach roughly three months ago that valued the smaller lender at about €11.5 billion at the time. Sabadell has said the offer is too low and investors would be better off if the bank stays independent.
BBVA, whose full name is Banco Bilbao Vizcaya Argentaria SA, has argued that the offer represents a good deal for Sabadell investors by creating a new domestic banking giant with more than €1 trillion in assets. One rationale is for Sabadell’s more Spain-focused business to complement BBVA’s, which is heavily dependent on emerging markets, most notably Mexico.
The proposed takeover would need “fewer” staff cuts than similar transactions in the past because headcount at both banks has already been reduced substantially over previous years, BBVA has said. The “bulk” of the savings would come from shedding IT and other expenses, it has said.
Gonzalez-Bueno declined to say if he would re-assess his position on the offer if BBVA were to improve it. That decision would be made “when the time comes,” he said.
The Sabadell CEO also said that BBVA’s share price “has a certain correlation with the share price of Mexican banks.” Sabadell shareholders should consider BBVA’s exposure to emerging markets and compare it to the smaller bank’s focus on “very predictable and stable countries” when ultimately deciding if they want to accept the offer, he said.
Sabadell on Tuesday stepped up the amount of money it wants to pay out to investors this year and next to €2.9 billion from €2.4 billion. BBVA Chairman Carlos Torres has expressed doubts about the goal, but Gonzalez-Bueno said in the interview that “there is no risk” Sabadell won’t meet it because “we prepare all our estimates very conservatively and we always leave buffers.”
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