Spanish banking group BBVA has raised its takeover bid for Banco Sabadell by 10 per cent, valuing the deal at €17 billion and offering Sabadell shareholders one BBVA share for every 4.8376 shares they hold.

The revised proposal, announced on Monday, is entirely in shares and comes after Sabadell’s board previously rejected BBVA’s initial offer, arguing it undervalued the bank’s prospects.

The new terms value Sabadell shares at €3.39 each, representing their highest level in more than a decade. BBVA’s board has also agreed to waive the possibility of further increasing the offer or extending the acceptance period, with the results of the bid expected by mid-October. The acceptance period will remain suspended until Spain’s securities regulator, the CNMV, approves the updated offer.

Carlos Torres Vila, BBVA’s chairman and chief executive officer, described the proposal as “an extraordinary offer, at a historic valuation and price, and the opportunity to participate in the enormous value generated by the merger. All of this translates into a significant increase in their expected earnings per share in the future, provided they participate in the exchange”.

The all-share structure means that, if more than 50 per cent of Sabadell’s voting rights are tendered, shareholders with capital gains would not be taxed in Spain, making the transaction tax-neutral in that scenario. BBVA said that Sabadell shareholders who have already accepted the offer will benefit from the improved terms.

The revised bid follows a decisive vote by Sabadell shareholders in August to approve the sale of its UK subsidiary TSB to Banco Santander and distribute an extraordinary dividend. The Spanish government has indicated that, should the takeover proceed, BBVA would not be allowed to fully integrate Sabadell for several years, potentially delaying some of the expected cost savings.

A merger between BBVA, Spain’s second-largest bank by assets, and Sabadell, the country’s fourth-largest, would create a major force in the Spanish banking sector. BBVA said the deal would be accretive to its own shareholders from the first year after completion, with an estimated 3 per cent improvement in earnings per share.

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