The surprise move, the first hostile bank takeover bid in Spain since the 1980s, pits the same longtime bank executives who tried unsuccessfully to negotiate a deal between the country's second- and fourth-largest lenders in 2020.
After a new rapprochement last month, BBVA Chairman Carlos Torres gave his Sabadell counterpart Josep Oliu a clear message in a May 5 letter: there would be no improvement in their total share offer.
Sabadell took the unusual step of publishing that missive after its board rejected the deal, leaving analysts wondering about BBVA's next move.
Three banking executives in Madrid, who have worked with both lenders and spoke on condition of anonymity, said they were "surprised" by the aggressiveness of the decision to turn hostile so soon.
"Turning hostile in a domestic - financial institution - setting is very rare," London-based advisory firm MKP Advisors said in a note. "But there has always been a perception in recent days that BBVA may have been preparing for this."
Sabadell and BBVA declined to comment.
BBVA's announcement sparked immediate opposition from the Madrid government.
Spanish Economy Minister Carlos Cuerpo said his government opposed the hostile takeover because it would have potentially damaging effects on the country's financial system.
Carles Puigdemont of the separatist Junts party, who is running for president of Catalonia - the wealthy region of Spain that Sabadell has called home since 1881 - said the takeover must be stopped.
Speaking to reporters Thursday as BBVA shares fell 6%, Torres seemed unfazed. If the hostile attitude damages BBVA's reputation, "so be it," he said.
Torres, a 16-year veteran at BBVA and chairman since 2018, has been watching Sabadell since a 2020 takeover attempt failed.
But he had doubts that Oliu would ever agree to sell a bank the 75-year-old Catalan has led since 1999, according to two banking executives familiar with Torres' decisions.
NEVER EASY
Torres and CEO Onur Gen? also in his post since 2018, have led strong growth at BBVA by betting big on Mexico and Turkey. The bank's market capitalization recently approached that of former rival Santander, a bank with far more assets.
But analysts and investors have begun to point to an over-reliance on Mexico, where business has flourished, and on the lure of Spain, where higher interest rates have swelled the banks' coffers.
Closing European banking deals has never been easy and politics often impede progress, even as European Central Bank supervisors have encouraged greater consolidation across Europe's fragmented industry.
The proposal leaves Sabadell, which has enlisted the help of Goldman Sachs and Morgan Stanley as advisers, with limited options.
Analysts at Berenberg said they were reassured by Torres' comments: he saw no supervisory obstacles to the deal and that political opposition would be short-lived.
"He (Torres) believes the transaction creates a bank that can better support society and also makes sense for Spain as a country (to have stronger banks)," they said.
(1 dollar = 0.9281 euros)
(Additional reporting by Emma Pinedo and Charlie Devereux in Madrid. Written by Tommy Reggiori Wilkes. Edited in Spanish by Marion Giraldo)
