By Elena Vardon

Spain's competition watchdog cleared Banco Bilbao Vizcaya Argentaria's acquisition of Banco Sabadell, putting the final decision on the year-long takeover battle in the hands of the government.

The CNMC, which flagged that a combination of the two Spanish banks would threaten competition in certain parts of the retail banking and payments markets, late Wednesday concluded that the remedies put forward by BBVA to address its concerns are "adequate, sufficient, and proportionate to solve the problems that this concentration poses."

BBVA is Spain's second largest bank by market capitalization but makes the bulk of its business in emerging markets like Mexico and Turkey, and set its sights on Catalan lender Sabadell a year ago to bolster its presence in its home market.

The bank went hostile in its pursuit of its smaller rival after it encountered opposition from Sabadell's management. The value of the initial $12 billion-plus deal has fluctuated since given the share component of the offer ties it to the stock price of both banks.

The watchdog moved the deal to an extended review called phase 2 in November, drawing out the standoff.

The remedies put forward by BBVA include keeping branches open and maintaining current commercial terms and conditions for customers, as well as loan volumes and price guarantees in certain municipalities. Most will be in place for three years, but can eventually be extended. The lender also agreed to divest some of the stakes it holds in payment-processing companies.

"The commitments we have made to the CNMC promote financial inclusion, territorial cohesion, and lending to [small and medium-sized enterprises] and the self-employed, while safeguarding competition, particularly in the regions where our presence will be most significant, such as Catalonia," BBVA Chair Carlos Torres Vila said.

Sabadell said the methodology used by the regulator is unsuitable and doesn't allow for an accurate assessment of the impact of the potential deal on small- and medium-sized enterprises, which form a large part of its client base.

"This authorization is not final," the CNMC said. The next step is up to the Spanish government, which has opposed a tie-up and now has 15 working days to trigger a phase 3 probe under which it can impose extra conditions on the grounds of public interest. The state can't stop the purchase of Sabadell shares by BBVA but can block a legal merger.

Beyond this, the remaining hurdles include the approval from the stock market regulator and the acceptance of the offer by Sabadell shareholders.

Sabadell has been trying to fend off the approach and will announce a three-year strategic plan and its outlook as a standalone entity at an investor day in the coming weeks.

Write to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

May 01, 2025 01:46 ET (05:46 GMT)

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