(Bloomberg) -- Banco Sabadell SA rejected an approach by Banco Bilbao Vizcaya Argentaria SA to initiate takeover talks, marking the latter’s second failed attempt to buy its smaller rival.

“Based on the detailed assessment of the proposal, the board has concluded that it is not in the best interest of Banco Sabadell and its shareholders and has therefore rejected BBVA’s proposal,” Sabadell said Monday in a regulatory filing. “The proposal significantly undervalues the potential of Banco Sabadell and its standalone growth prospects.”

Last week, BBVA made a surprise offer to start talks about a possible acquisition of Sabadell. The proposed all-stock deal valued the smaller bank at a 30% premium to its closing price on April 29 — or about €12 billion ($13 billion). It also offered to give Sabadell shareholders a 16% stake in the combined company. 

While some at Sabadell were initially open to starting talks, BBVA made clear to its smaller rival late this weekend that it won’t improve its all-share offer, according to people familiar with the matter. That stance in part reflected the drop in BBVA shares since the offer became public, which gave the lender no flexibility to amend its offer, they said.

BBVA’s communication was among the factors that pushed Sabadell to reject the deal outright, the people said, asking not to be identified discussing internal deliberations.

The transaction would have created a behemoth with more than €1 trillion ($1.1 trillion) of assets and a market value of roughly €70 billion, rivaling Spain’s largest lender, Banco Santander SA.

BBVA shares rose 2.3% as of 1:37 p.m. in Madrid on Tuesday while Sabadell was down 1.3%. Shares of Sabadell are up about 7% since the initial approach on April 30, while BBVA’s have slumped around 8%.

In its statement Monday, Sabadell said the sharp decline in BBVA’s stock “adds uncertainty” to the proposal.

A spokesperson for BBVA said: “We regret that the board of Banco Sabadell has rejected such an attractive offer.” 

Read More: BBVA’s €12 Billion Sabadell Proposal Signals Banking Shakeup 

The two lenders held short-lived negotiations in late 2020 about a combination before the talks fell apart over the price tag. At the time, Sabadell was in worse shape. It had problems in its UK unit TSB and was facing questions over provisions linked to mortgages and its sprawling small- and medium-enterprises business, one of the largest in Spain, amid the economic collapse caused by the pandemic. 

Sabadell’s valuation has soared since then, and it fixed the UK unit while rising interest rates have boosted the European banking industry as a whole.

BBVA likely has “some wiggle room on price” and Sabadell probably has not fully closed the door to future negotiations although the two parties currently seem a long way away from finding middle ground, RBC analyst Benjamin Toms wrote in a note.

--With assistance from Tom Metcalf, Manuel Baigorri and Jan-Henrik Förster.

(Adds weekend developments in fourth and fifth paragraphs.)

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