By Valentina Za and Gianluca Semeraro
MILAN (Reuters) -Monte dei Paschi di Siena has launched a 13.3 billion euro ($14 billion) all-share buyout offer for merchant bank Mediobanca, just over seven years after Italy rescued the Tuscan bank to avert a wider crisis.
The offer steps up the already hectic pace of Italian banking consolidation and comes after the government’s previous attempts to return Monte dei Paschi (MPS) into private hands via a partner failed.
UniCredit, under CEO Andrea Orcel, ditched a proposed MPS acquisition in 2021 and bid instead for Banco BPM in November scuppering the Treasury’s plan for a potential BPM-MPS tie-up.
MPS, which for a decade was the problem child of Italian banking, is offering 23 of its own shares for every 10 Mediobanca shares tendered, equivalent to a 5% premium versus Thursday’s closing price.
MPS CEO Luigi Lovaglio, a veteran banker who presided over the Siena-based bank’s turnaround, said the offer was meant as “friendly” and the project centred on preserving the Mediobanca name for investment banking, which he would not lead.
“We have no plans to make Mediobanca disappear,” Lovaglio said. “I don’t even have the skills to be a CEO of an investment banking business.”
A person close to the matter told Reuters Mediobanca saw the offer as not previously agreed, though not unexpected.
Markets were not impressed by the plan, with MPS’s shares down more than 9% in early trading. Analysts were also cautious about the chances of success and execution risks.
Mediobanca, focused on investment banking, wealth management and consumer finance, has a market value of 12.7 billion euros, above MPS’ 8.8 billion euros.
But MPS has 3 billion euros in tax credits stemming from past losses which it can use in the deal, adding 500 million euros a year to profits for six years. It targets a 100% dividend payout ratio.
SHAREHOLDERS
The buyout offer comes after the sale of an MPS stake by the state in November brought in shareholders Delfin, the holding company of late billionaire Leonardo Del Vecchio, and fellow tycoon Francesco Gaetano Caltagirone.
Delfin is the biggest shareholder in Mediobanca with 19.8% while Caltagirone owns 7.8%.
Delfin nearly tripled its initial MPS holding to 9.8% in January, first raising the prospect of a potential deal.
Lovaglio told analysts: “Even if it’s something that is difficult … there is a strong rationale.”
“We will have a combination of revenues that will make us stronger … to face a landscape that can be even more difficult than the current one.”
MPS shares have more than tripled in value since November 2022 when Lovaglio pulled off a make-or-break cash call to fund thousands of staff layoffs and drive profits through cost cuts.
With interest rates set to fall, banks are under pressure to find different sources of revenues.
Mediobanca is the largest investor in insurer Generali, which accounts for over a third of its income, and MPS can benefit from that and also look to Generali when its insurance partnership with AXA ends in 2027, Lovaglio said.
Mediobanca made its name as an M&A boutique and lender to Italy’s biggest companies before switching to wealth management under CEO Alberto Nagel.
Its major shareholders Delfin and Caltagirone have been critical of Nagel, accusing him of relying excessively on Generali.
MPS, which aims to take Mediobanca private, estimated pre-tax benefits of 700 million euros a year from the tie-up.
The finalisation of the exchange deal is expected by end-September.
PRIVATISATION DRIVE
Caltagirone and Delfin are also large shareholders in Generali, accounting for almost a third of its capital base along with Mediobanca’s holding.
Caltagirone, who had initially bought 3.5% of MPS, increased the stake to 5% in November.
Italy has gradually reduced its MPS stake to 11.7% from the initial 68%.
After UniCredit walked away from MPS in 2021, mid-sized peers Banco BPM and BPER were left as the only two potential partners. Banco BPM in November became a shareholder in MPS alongside Delfin and Caltagirone.
MPS’ bid for Mediobanca will remove a potential defence option for BPM, which had considered whether it could pursue an MPS deal to fend off the UniCredit takeover.
($1 = 0.9568 euros)
(Reporting by Valentina Za in Milan and Gursimran Kaur in Bengaluru, additional reporting by Giulia Segreti, editing by Gavin Jones and Jane Merriman)
