By Jesús Aguado and Emma Pinedo

MADRID (Reuters) -Spain's BBVA said on Friday that its 14.9 billion euro ($17.44 billion) mostly share-based hostile bid for Sabadell is scheduled to begin on Monday, while the target bank's chairman said the offer was worse than its earlier one.

BBVA said it now expects the merger to generate 900 million euros in cost savings, from an initial estimate of 850 million euros, but added that those combined benefits are now projected to materialise in 2029 after the Spanish government blocked a full merger of the two banks for at least three years.

Before that, the bank expects to achieve 235 million euros in cost savings by 2028. Combining the two lenders would create the second largest Spanish bank in terms of domestic assets with more than 1 trillion euros, behind Caixabank.

Sabadell shareholders will have until October 7 to tender their shares, according to the expected calendar, with the results of the offer expected by October 14.

"We already have the deal up and running. It's a great offer with a lot of value creation potential. Let's get it done," BBVA's Chief Executive Onur Genc told analysts and investors in a conference call.

Sabadell's board has 10 working days from September 8 to issue its formal opinion on the bid. On Friday, it said its board will conduct a new in-depth analysis and will issue a reasoned assessment, but its chairman Josep Oliu said the offer was worse than the original one that was rejected by his board in 2024.

Back then, BBVA surprised the market when it made a first offer, which turned hostile after the board shunned it.

BBVA aims to secure the majority of voting rights or 49.3% of Sabadell's shares.

Although the bank received authorisation from the U.S. Securities and Exchange Commission, where the bank's shares also trade, to lower the acceptance threshold to 30%, BBVA still intends to secure at least 50% of voting rights.

"We have a condition that stipulates that if we do not reach 50% (of voting rights), the takeover bid would not go ahead," Chairman Carlos Torres said. "We want to be in control and we have no intention of changing that."

Shareholders of Sabadell are widely dispersed. Its 20 largest shareholders are international institutional investors and none of them owns more than 7%, according to LSEG data.

An association of Sabadell's minority shareholders said on Friday that BBVA's swap does not pay for Sabadell's potential and that BBVA seeks to get it at a "bargain price."

BBVA now offers one newly issued ordinary share and 0.70 euros in cash for every 5.5483 ordinary Sabadell share, or about 14.9 billion euros for the entire Sabadell, according to Reuters calculations, based on Thursday's closing prices.

Sabadell's Chairman Josep Oliu said in a statement the offer is even worse than the one the board rejected in 2024.

"If they accept BBVA's offer today, shareholders will lose more than 8% of their investment, they will not receive the extraordinary dividend of 50 cents that will be paid in early 2026 when the sale of (British unit) TSB is completed, and they will have to pay taxes on the capital gains from the exchange of their shares," Oliu said.

Judging by the performance of both banks' shares since the bid was first announced in April 2024, investors seem to expect BBVA will sweeten its offer, even though the bank has ruled it out.

"We have made it very clear: we consider the offer to be extremely attractive, and the offer is what it is," Torres told reporters.

It can legally raise the offer until five days before the end of the acceptance period, though.

Despite opposition from politicians and concerns from consumer rights groups, the takeover was eventually approved by the Spanish anti-trust agency and the government with strict conditions such as a three-year ban on a full merger.

Torres said he expects the merger to take place at the end of 2028, or the beginning of 2029.

Sabadell's shares trade above the original 30% premium BBVA offered over the closing price of Sabadell shares before the bid's announcement on April 29, 2024, and have since outperformed BBVA shares. ($1 = 0.8542 euros)