Sabadell rejected BBVA bid over capital impact, costs savings, CEO says

By Jesús Aguado

MADRID (Reuters) -Spain's Sabadell rejected BBVA's takeover offer because the bidder underestimated the deal's negative effect on capital reserves and overestimated cost savings, Sabadell's CEO said in his first public comments on the proposal.

The capital ratio impact would be "significantly higher than the 30 basis points" foreseen by BBVA, Cesar Gonzalez-Bueno told a banking event a week after BBVA launched a hostile 12.23 billion euro ($13.1 billion) all-share takeover offer.

The surprise move triggered immediate opposition from the government.

Sabadell's board had rejected an earlier merger proposal from BBVA, before BBVA took it directly to the shareholders of its smaller rival.

In its proposal, BBVA estimated annual cost savings at about 850 million euros before tax, spread over three years.

However, Gonzalez-Bueno said there were "potential negative commercial effects" from the deal that could affect savings, without elaborating.

Shares in BBVA have declined 8% since April 29, the day before news emerged that BBVA was exploring negotiations with Sabadell, while Sabadell's shares have risen about 8%.

At 1515 GMT, Sabadell's stock was down 1.44% and BBVA's down 2.2%.

Gonzalez-Bueno declined to comment on further steps his bank might take to defend itself against BBVA's bid, as Spain's takeover law "severely restricts the things that can be said once the takeover bid has taken place".

Spanish legislation obliges the governing bodies of the target company to remain passive and request shareholder approval before taking any action that may prevent the success of a takeover bid.

"(The Spanish takeover rule) lowers the probability for them in counter-bidding for another bank. It's not a zero probability, but a less likely scenario," said Antonio Reale, co-head of European banks at Bank of America.

He added it was "unlikely" Sabadell might strike an alternative deal with Santander or Caixabank.

Asked if there was still room for a potential agreement with BBVA if it improved its offer, Gonzalez-Bueno said it was up to BBVA's board to decide whether it wanted to do that.

BBVA's Chief Executive Officer Onur Genc and Chief Financial Officer Luisa Gomez Bravo, initially expected to participate, pulled out of the banking event.

The Sabadell board also considered the potential impact of a merger on its staff, Gonzalez-Bueno said, adding the news of the takeover bid had generated concern among employees.

($1 = 0.9206 euros)

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo and Inti Landauro; Editing by Tomasz Janowski and Mark Potter)