Seeking 'white knights' is one of the few avenues of opposition that legislation allows for the bank chaired by Josep Oliu. If you don't find them, you will have to convince your shareholders that the offer is bad for their interests; or get regulators to stop it.
The announcement of Bbva's takeover bid for Sabadell, under the same terms as the proposal rejected a few days ago by this entity, automatically causes the application of one of the most controversial clauses in the Spanish legislation of this type of operations: the duty of passivity of the board of the intended company.
After Gas Natural's legendary hostile takeover of Endesa in 2005, against which this electricity company defended itself tooth and nail and ended with the victory of a counteroffer from Enel, The Spanish Government promoted a change in the royal decree on takeover bids to clarify the actions that a takeover company can carry out.
“From the public announcement of a public acquisition offer and until the publication of the result of the offer, the administrative and management bodies of the offeree company; any delegated body or proxy thereof; their respective members; as well as the companies belonging to the group of the affected company and anyone who could act in concert with the above, must obtain prior authorization from the general meeting of shareholders, before undertaking any action that may prevent the success of the offer, with the exception of the search for other offers,” explains the regulations.
Specifically, Sabadell will not be able, except with the permission of the board, to issue new securities, promote other operations that affect its shares, sell assets or distribute extraordinary dividends.“This would block, for example, the bank from now trying to seek an alternative integration with another entity such as Unicaja, or imitate what Endesa did with the delivery of large rewards to shareholders.
The law does allow the bank chaired by Josep Oliu to “search for competing offers”, the so-called white knights. “If in this process access is given to any type of non-public information of the affected company, equality must be ensured between all potential bidders.” Returning to the case of Endesa, after the Gas Natural takeover bid, other interested parties were sought and E.ON and Enel ended up doing takeover bids. Curiously, Carlos Torres, current president of Bbva, was director of strategy at Endesa during that fight for control.
In the case of Sabadell, the alternatives seem few. In Spain, there are two other large banks with the capacity to purchase (Santander and CaixaBank) but they seem satisfied with their current position in the domestic market. And given the lack of banking integration in Europe, it also seems difficult to attract entities from other countries. Perhaps the French companies (BNP or Société) could be the only ones willing to take a look at Sabadell, which in addition to giving them a position in Spain would give them entry into the British market. Among the British banks, Barclays was in Spain after buying Zaragozano and ended up selling to CaixaBank.
The appearance of investment funds also seems complicated, since Regulators could take a dim view of an entity like Sabadell becoming controlled by a foreign financial investor.
Despite these restrictions on takeover companies, hostile operations in Spain have been few and unsuccessful. In the current case, Bbva seems willing to play a long game, blocking Sabadell's ability to act and starting a regulatory process of about 6 to 9 months, after which it will be seen if the terms of the offer are attractive or there could be some type of negotiation or improvement. The legislation allows the appearance of white knights until almost the end of the offer acceptance period.
