Banco de Sabadell (SAB) Status Update summary

Board response and rationale

• The board unanimously rejected the BBVA hostile tender offer, citing fundamental undervaluation, value destruction for shareholders, and stronger future prospects as a standalone entity.

• The offer is based on unrealistic assumptions, significant execution risks, and uncertainties regarding future synergies and merger approval.

• Current offer terms are less favorable than the original proposal, with Sabadell shareholders receiving a lower stake, immediate capital gains taxes, and a cash component below tax liabilities for many Spanish retail investors.

• Widespread opposition from employees, unions, political parties, business associations, and competition authorities increases execution risks and regulatory hurdles.

• Previous merger proposals from BBVA were rejected, with Sabadell outperforming BBVA since.

Standalone performance and value creation

• Sabadell has delivered strong returns, outperforming Spanish and European peers and BBVA since 2020, with a projected return on tangible equity of 16% by 2027.

• Shareholder remuneration is expected to total €6.3 billion (about 37% of market cap) from 2025-2027, with a front-loaded distribution and an extraordinary €0.50 per share dividend from the TSB sale.

• The bank has a track record of exceeding guidance and executed the TSB sale above expectations, supporting its standalone growth potential.

• Sabadell’s business model offers superior capital generation and higher, more predictable distributions compared to BBVA.

• Shareholders who do not accept the offer remain with a liquid, publicly traded stock.

Comparative analysis of offer and valuation

• Sabadell's share price is 11% above BBVA's offer, and all valuation methodologies indicate a 24%-37% value shortfall in the offer.

• Peer-based and regression models, as well as P/E, P/TBV, and Gordon Growth Model, support a standalone valuation significantly above the offer price.

• Precedent European banking transactions had an average 40% premium, which is not reflected in BBVA's offer.