MADRID – Spain’s competition watchdog has said that BBVA’s (NYSE: BBVA) commitments to address potential concerns over its Sabadell takeover bid are insufficient to reduce risks in areas such as small business lending and a longer review is needed.
Last week, the regulator said that BBVA’s all-share offer for Sabadell, valued in April at more than 12 billion euros ($12.64 billion), must undergo a longer phase 2 antitrust review that could extend the process well into 2025 in a deal opposed by the government.
The watchdog said it could not rule out the risk of “unilateral effects in the form of a reduction in lending to SMEs (small and medium-sized businesses)”.
As shares in BBVA have fallen around 15%, the deal is now worth around 10 billion euros. At 0925 GMT on Thursday, shares in BBVA and Sabadell were down around 1%.
One of BBVA’s main motivations for the deal is to diversify away from emerging markets and increase its presence in SME lending in Spain where Sabadell is a market leader.
The CNMC also warned about the risk of branch closures which could reduce competition in some areas. Both banks have a significant presence in Catalonia.
To address these concerns, BBVA (NYSE: BBVA) on Wednesday included a pledge not to close branches where there is no alternative nearby within a 300-metre (984-foot) radius.
The bank also committed to maintaining commercial terms for individuals and SMEs in areas where fewer than four financial institutions operate and to preserve working capital lines for all SMEs for 18 months and maintaining the current loan volume for businesses that exclusively work with BBVA and Sabadell.
A Sabadell spokesperson declined to comment. The bank has always said that a merger would negatively impact lending to SMEs.
Following the completion of a “phase 1” review, the CNMC said the Catalonia and Valencia regions were problematic as they include provinces where the combined market share of BBVA and Sabadell for retail banking products exceeds 30%.
It also identified a duopoly structure in 50 municipalities.
On Wednesday, BBVA (NYSE: BBVA) said that, in line with previous transactions, it had proposed the sale of payment company stakes where there is a high market share.
The bank added that it would continue to cooperate closely with the authority to finalize the commitment agreement and the authorization for the transaction “as soon as possible”.
($1 = 0.9497 euros)
