Spain’s second-largest bank BBVA announced Thursday a hostile takeover bid for smaller rival Banco Sabadell but the government vowed to block the move, which would create a European giant in the sector.

BBVA’s new bid came three days after Sabadell’s board of directors rejected a merger proposal, saying it was “not in the best interest” of the bank.

The takeover proposal values Sabadell, Spain’s fourth-largest banking group in terms of capitalisation, at nearly €11.5 billion ($12.3 billion).

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

But Prime Minister Pedro Sánchez’s leftist government swiftly came out against the move, as did the regional government of Catalonia where Sabadell was born and where it has a strong presence.

Labour Minister Yolanda Díaz said it was against Spain’s “interests” because it “would destroy many jobs”.

Esta OPA hostil del BBVA es una operación contraria a los intereses de nuestro país. Destruiría mucho empleo, provocaría exclusión financiera y más oligopolio.

Supone liquidar al Sabadell en beneficio solo de los fondos de inversión extranjeros que son propietarios del BBVA. https://t.co/MeTjuLoPDW

— Yolanda Díaz (@Yolanda_Diaz_) May 9, 2024

Economy Minister Carlos Cuerpo warned the government “will have the last word when it comes to authorising the operation” which he said would be “potentially damaging”..

The head of the regional government of Catalonia, Pere Aragonès, echoed these concerns, telling Spanish public television the takeover would “affect many jobs in Catalonia”.

Aragonès is facing a regional election in Catalonia on Sunday, with polls showing he is trailing.

READ ALSO: Why regional elections in Catalonia matter to Spain’s future

The takeover would be carried out under same conditions as the initial approach — an exchange of one new BBVA share for every 4.83 Sabadell shares, a 30-percent premium over the April 29th closing price of both banks, BBVA said.

“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 in the statement.

A takeover would create a banking powerhouse capable of competing with Santander – Spain’s leading bank – as well as with European giants such as HSBC and BNP Paribas.

BBVA, which also has operations in Mexico, Argentina and Turkey, is Spain’s second-largest banking group in terms of capitalisation and has 74.1 million customers.

Sabadell operates in 14 countries and has nearly 20 million customers.

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