A month after the failure of BBVA’s takeover bid for Sabadell, the panorama after the battle is singular. Also radiant for the two banks involved, opante and opado, because they agree with those who claimed that they would be better off separated than together.
Financially, both did very well. BBVA has exceeded the threshold of 100 billion capitalization on the stock market, shooting up like a rocket from 15.79 euros on 10 October – at the end of the period of acceptance of the offer by the shareholders of the opado, which constituted the reference – to 18.9 euros on Wednesday 12 November. The dad market dictated the law. He positively evaluates the health of the Basque bank as excellent. Negatively, it describes the merger as a mistake.
And Sabadell reached his absolute historic record. His rally it was more modest than that of its rival, with its price going from 3.17 euros on October 10 to 3.429 this Wednesday: an increase of 8%. But still higher than the exchange rate offered at that time. The market father thus denied the prophecy according to which the Catalan bank would collapse after the failed takeover bid because its upward run owed everything to the wait for the merger, and nothing to the improvement of its management, as the president of BBVA preached, especially during the acceptance period.
But there are other trends that should be incorporated into the action manual of bankers and bank managers: some, because they reinforce presumptions; others, because they dispel myths. Hence the extreme difficulty of a hostile takeover bid in the financial sector. Not only is it more disruptive and produces more noise and uncertainty than a friendly one, but it is doomed to failure if it is not extremely generous. In other words, very expensive for the opponent: in the exchange rate equation, not to mention the consultants, the advertising, the attractive distribution of dividends. And destined for the abyss. As an American banker told Sabadell president Josep Oliu, “hostile; non-premium; there’s no way”: if it is hostile and without reward, sunk.
The myth of inorganic growth through mergers as an essential lever for achieving scale has also been qualified by the extraordinary subsequent well-being (and results) of the two entities. Both have easily taken refuge in their plan B of organic growth: through their own business and/or strengthening sector alliances with providers of technology, insurance, payment methods… Something less epic than revolutionary acquisitions, but perhaps sometimes more convenient. Like this one, in which BBVA and Sabadell must digest an overwhelming increase in their dividend commitments, that fundamental fuel to guarantee the loyalty of shareholders in their tough offensive and defensive career.
But it has also been demonstrated that “financial loyalty“that’s not all. It combines with other factors of “brand loyalty“: such as the entrepreneurial environment, the territorial roots, the specific perception of the social utility of an entity. The intervention of the minority shareholders of the oppressed bank was decisive. Not only in terms of their own weight (around 40% of the capital). But because the large institutional investors, such as investment funds, sovereign funds or others – not the speculative ones or the sharks – proved to be allergic to any operation that involved conflict with other sectors of capital.
In this way Oliu was able to conclude that his minorities demonstrate that, in the almost total absence of large individual physical holders, “they are the hard core” of his bank: a warning for other navigators/adversaries. It is true that in that case their weight in capital helps, and the fact that they combine that status with that of customers. But in other large banks there are also small ones. And how much! They represent 36% of Santander’s capital and 35% of BBVA itself. The difference is that in that case only some mobilized in an organized way, understanding that the independence of their home entailed values and purposes beyond financial ones… even a “general interest”. It would be logical for these voices to be represented at the top of the entities, together with the “independent” technocrats. And that this translates, if not into binding rules, at least into voluntary codes of conduct.
In contrast, supposedly hard cores formed by large institutions sometimes challenge, as in this case, the presumed financial logic of business schools: the hard core becomes soft.
And thus we arrive at the first institutional aspect of the OPA understood as business case and future laboratory. On the one hand, the position taken by the relevant shareholder market in terms of perception of the competition that actually exists and how to preserve it should give the regulator pause. It would behoove CNMC to review its metrics, its calculations… and its knowledge of the real playing field: How many of its directors and managers have work experience in the corporate and/or private sector? How many have served a bill and been fired or fired?
There are two other pending matters, the judicial ones. BBVA appeal against the Government’s provision; and the European Commission procedure against the financial legislation of the Kingdom of Spain. Lots of fabric to cut. Soon.
