The Diplomat
The Council of Ministers authorized this Tuesday the merger between BBVA and Sabadell on the condition that they “maintain legal personality, separate assets, and management autonomy” over the next three years, as announced by the Minister of Economy, Carlos Cuerpo.
With this decision, the Government is tightening the conditions initially imposed by the National Commission of Markets and Competition (CNMC) to accept BBVA’s hostile takeover bid for Sabadell. The Competition Law, which the Council of Ministers has relied on, allows the Government to soften or tighten the CNMC’s conditions in the name of the general interest.
According to Carlos Cuerpo’s statement at the press conference following the Council of Ministers meeting, this measure will allow Sabadell to maintain its independence in terms of management autonomy, financing and lending to SMEs, human resources, its branch network, and social welfare. With this decision, Sabadell will remain a legally separate entity for at least three years, extendable to another two.
According to the Ministry in a press release, “each entity must maintain autonomy in the management of its activities, aimed at maintaining the criteria of general interest, distinct from those related to the defense of competition, which underpin the decision of the Council of Ministers.”
“These criteria are rooted in the Spanish Constitution, are promulgated by various provisions of the legal system, and are endorsed by the jurisprudence of the Court of Justice of the European Union,” it added.
Specifically, these criteria are: ensuring adequate maintenance of the objectives of sectoral regulation linked to supporting growth and business activity, worker protection, territorial cohesion, social policy objectives related to the social work of foundations, financial consumer protection and affordable housing, and the promotion of research and technological development.
The process began thirteen months ago. During this period, the European Central Bank gave its approval in September and the CNMC (National Commission for the Promotion of Competition) in May, after which it opened a 15-day period for the Ministry of Economy to decide whether to raise the issue to the Council of Ministers, which it ultimately did.
The minority partner in the coalition government, Sumar, had asked the Council of Ministers to introduce a series of conditions, specifically a ban on layoffs, office closures, and the merger between the two entities. For its part, the European Commission has expressed concern about the possibility of the government blocking the transaction and has warned that the Competition Law could contravene European treaties.
For his part, BBVA Chairman Carlos Torres reminded investors yesterday, Monday, that he has the legal authority to withdraw the offer if he believes the new conditions agreed upon by the government affect the transaction’s profitability. He also did not rule out appealing the executive branch’s decision, which, by its nature, is subject to appeal before the Supreme Court. The bank believes the government only has the authority to relax the CNMC’s conditions, not to tighten them.
