On Thursday, BBVA officially formulated its takeover bid for Banco Sabadell, making a direct approach to the shareholders of its competitor, which had rejected the offer earlier in the week.

The offer submitted by the Spanish banking group proposes the exchange of one new BBVA share to be issued for 4.83 existing Sabadell shares, representing a 30% premium over the closing price on April 29, the day before BBVA's first expression of interest.

Although the Basque-based bank referred to the offer as "extraordinarily attractive", Sabadell's Board of Directors preferred to reject it on Monday, considering that the "unsolicited" proposal significantly undervalued its business project and growth prospects.

According to BBVA, the combination would create Spain's second-largest banking group, with an estimated 21.9% market share in bank loans.

"After CaixaBank's 'game changer' M&A deal for Bankia in 2020, BBVA logically found itself in greater need than its rival Santander (....) to make a reactionary move in the Spanish banking consolidation process, given its less favorable positioning", explain Oddo BHF's analysts.

According to the research firm, BBVA's market share in Spain is currently less than 15%, compared with 15-20% for Santander and 25% for CaixaBank.

As a reminder, BBVA had already attempted an approach for Sabadell at the end of 2020, but negotiations ultimately failed due to disagreement between the two management teams.

While Oddo's analysts recognize that the logic "remains" valid in substance, they are more concerned about the deal's potential accretive impact, which they consider modest.

This view seemed to be widely shared by the market on Thursday: at around 11:00 am, BBVA shares were down by almost 6%, while Sabadell shares were up by more than 3%, as investors seemed to be banking on a possible increase in the offer presented this morning.

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