Spain's second-largest bank BBVA announced a hostile takeover bid for its smaller rival Banco Sabadell on Thursday, yet the government has pledged to block the move, as it would create a European giant in the banking sector.

BBVA's latest bid came three days after Sabadell's board of directors turned down a merger proposal, citing that it was “not in the best interest” of the bank.

The takeover bid values Sabadell, Spain’s fourth-largest banking group by market capitalisation, at almost €11.5 billion.

“The operation will create one of the best banks in Europe,” said a BBVA statement.

The takeover would proceed under the same conditions as the initial approach – with an exchange of one new BBVA share for every 4.83 Sabadell shares, representing a 30% premium over the closing price of both banks on 29 April, according to BBVA.

“We are presenting to Banco Sabadell’s shareholders an extraordinarily attractive offer to create a bank with greater scale in one of our most important markets,” BBVA Chair Carlos Torres Vila said within the statement. 

A takeover would result in a banking powerhouse capable of competing with Santander, Spain’s leading bank, as well as with European giants such as HSBC and BNP Paribas, AFP reports.

Nevertheless, Prime Minister Pedro Sanchez's leftist government quickly came out in protest of the move, as did the regional government of Catalonia, where Sabadell was founded and maintains a strong presence.

In addition, Labour Minister Yolanda Diaz said the move was against Spain’s “interests” as it “would destroy many jobs.”

Economy Minister Carlos Cuerpo also warned the government “will have the last word when it comes to authorising the operation.”

Whilst head of the regional government of Catalonia, Pere Aragones reiterated these concerns, stating the takeover would “affect many jobs in Catalonia.”

BBVA, which also operates in Mexico, Argentina, and Turkey, is Spain’s second-largest banking group by market capitalisation and serves 74.1 million customers.

Whilst Sabadell operates in 14 countries and has almost 20 million customers.

On Monday the bank said the initial offer “significantly undervalues the potential of Banco Sabadell and its standalone growth prospects.”

It also highlighted the recent “decline and volatility in the BBVA share price” which showed “the uncertainty around the value of the proposal.”

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