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In a conference in Barcelona last month with the headline “Europe: wake up call?””, Spanish Prime Minister Pedro Sánchez took to the stage and urged the continent to “wake up once and for all . . . Take charge of its fate and put words into action.
The EU — galvanised by US President Donald Trump’s aggressive tariff policies — is awash with talk of stimulating economies and boosting competitiveness. The EU’s competitiveness has been boosted by last year’s influential report Ursula von der Leyen has taken note of former European Central Bank President Mario Draghi’s comments on European Competitiveness. A commission consultation on merger rules It is being implemented to encourage the growth of companies through acquisitions in order to compete better with their global rivals.
Both the EU policy push and Sánchez’s pronouncements in Barcelona look like dream news for those pursuing mergers and acquisitions. This should prove to be a great boost for UniCredit, which is pursuing acquisitions in Germany and Italy. And BBVA, who are chasing down their Spanish rival Sabadell.
But the opposite is also true. Despite all the rhetoric, both at EU and state levels, there is a strong practical opposition to banking deals (with a few exceptions like last week’s purchase by France’s BPCE of Portugal’s Novo Banco). It is nowhere more evident than in Spain. Only a few weeks after that Barcelona speech, Sánchez’s government placed another obstacle in the way of the proposed BBVA-Sabadell deal, referring it to a review by cabinet ministers.
Any merger must go through antitrust reviews — which BBVA-Sabadell passed, with remedies — as well as secure EU-level support, which it has. So why has the transaction so inflamed Sánchez and his government?
The initial issue was the resistance of the target. Sabadell refused to accept an agreement and the timing was terrible when BBVA made a hostile move after hearing about it in April. It came just a few days before regional elections in Catalonia — Sabadell’s heartland. The socialist government of Sanchez, who has placed protecting jobs as a priority, may find mergers problematic. A general election won’t be held until the summer of 2020.
Carlos Torres, the tiggerish BBVA chairman, used to call his bid for Sabadell “unstoppable”. This seems a bit fanciful today. The process has been difficult so far. The bank was angry about what they saw as a politicisation of Spain’s National Commission for Markets and Competition’s antitrust process. BBVA finally overcame its antitrust concerns by April after promising remedies, including the protection of vulnerable customers, and maintaining lending volumes and branch numbers to small and medium-sized businesses.
The government launched a public consultation that was unprecedented, as well as a cabinet review. The European Commission warned Spain last month that, alarmed by the level and intensity of the interference, it lacked the legal authority to stop the takeover.
Everyone knows that if Sánchez digs in his heels, he can kill the deal all the same. The EU could take legal action if Sanchez continued to delay, but it wouldn’t be worth the effort: the time required to bring infringement procedures would make any current takeover offer ineffective.
What is the next step? What can we learn from another Spanish company? The campaign by Telefónica to pursue its own agenda of mergers, in Spain and across Europe, seems to have garnered the support of the Spanish government. The government’s support for diversified technology investments is the quid pro quo. Marc Murtra, the newly appointed chief executive officer, is supporting this. Torres’s problem? Murtra, a rare Spanish business figure and a friend of Sánchez’s administration, was put in position by the government after it took a 10 per cent stake in the company and forced out his predecessor.
If the wily BBVA boss can find a way to overcome Sánchez’s antipathy with investment pledges or other sweeteners — while avoiding more invasive interference — he might finally be able to put his offer to the shareholders of Sabadell. Torres has probably got it right when he says that this deal would benefit Spain and Europe in general. But in any case, now that antitrust concerns have been addressed, shareholders should be able to make the final decision, not bureaucrats.
patrick.jenkins@ft.com
