(Bloomberg) -- A rising Banco Sabadell SA share price will ultimately force BBVA SA to either make a better offer for the smaller rival or abandon its hostile takeover effort, an Alantra Equities analyst said.
“We expect the correlation with the BBVA share swap will break once the market recognizes better value in Sabadell’s standalone story, forcing BBVA to either improve its offer or walk away,” analyst Francisco Riquel wrote in a note Monday. He sees room for BBVA to “sweeten the bid in cash by 15%.”
BBVA, whose full name is Banco Bilbao Vizcaya Argentaria, launched a hostile offer for Sabadell earlier this year valuing the smaller lender at $11.5 billion at the time. The bank is offering one newly issued BBVA share for every 4.83 Sabadell shares.
Shares of BBVA, Spain’s second-biggest lender, have lost about 14% since the day before it confirmed its takeover intention, while Sabadell’s are up 9%. That has reduced the premium on Sabadell’s current share price implied by BBVA’s offer to about 2%.
Another hurdle the deal will have to clear is approval by Spain’s antitrust agency CNMV. The chances of CNMV derailing the bid “are not low” as it may impose “hard remedies” after a lengthy vetting process, Riquel said in the note. The outcome will be known in three to six months, he said.
--With assistance from Jorge Zuloaga.
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