By Elena Vardon


Banco Bilbao Vizcaya Argentaria got approval from its shareholders for a capital increase to fund its $12 billion-plus hostile takeover of smaller rival Banco de Sabadell.

The support from its own shareholders means Spain's second-largest bank by assets cleared one of the many hurdles it faces to push through with its plans. With the bid, BBVA aims to strengthen its domestic operations and boost its business in developed markets, reducing its exposure to developing countries such as Mexico and Turkey.

Besides winning over at least half of Sabadell's shareholders--48% of which are retail shareholders--BBVA must get the green light from the Spanish government and the country's stock-market regulator. BBVA aims to form a combined bank with over 1 trillion euros ($1.081 trillion) in assets and 100 million customers across the globe.

BBVA shareholders voted 96% in favor of the lender's proposal to issue 1.13 billion new shares, which the bank intends to offer to Sabadell shareholders, at extraordinary general meeting held Friday, it said. The newly issued shares are valued at EUR10.82 billion, based on Thursday's closing price of EUR9.61.

BBVA's Chairman Torres Vila said the approval marks an important step in the acquisition process.

In May, BBVA went directly to Sabadell shareholders with a takeover offer, days after Sabadell's board rejected an approach which it said undervalued the group and its prospects.

BBVA's offer valued Sabadell's shares at EUR2.12 each, implying a total value of EUR11.53 billion based on the average price of the quarter prior to the announcement. Torres Vila has described the offer as unstoppable.

The value of a potential transaction has since fluctuated given that the all-share deal is tied to BBVA's stock price.

BBVA's shares have fallen around 12% since the day before the bid was made public, while Sabadell's have risen about 7%, shrinking the premium initially implied by the offer.

Ahead of the meeting, proxy advisers ISS, Glass Lewis and Corporance had recommended that BBVA shareholders vote in favor of the share issuance, though each cautioned on risks and uncertainties given the complexity of the transaction.

The deal could drag on for months while BBVA seeks the necessary approvals.

In a letter to shareholders published on Thursday, Sabadell's Chairman, Josep Oliu, said the acceptance period for the offer could open at the end of 2024 or perhaps even in 2025. BBVA should have published clear, transparent and comprehensive information on all aspects of the bid that may have an impact on the value of the offer by then, Oliu said.

The Spanish government is concerned that a tie-up could have harmful effects on the country's financial system. It has said that a more concentrated banking system in the hands of few lenders could hurt employment and customers, increase risks to stability and jeopardize territorial cohesion.


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


(END) Dow Jones Newswires

07-05-24 0802ET