Monte dei Paschi buys Mediobanca for €13 billion

Italy rescued sienapaschi hill launched a 13.3 billion euro ($13.95 billion) all-share takeover bid for its larger domestic peers on Friday Medio Bank.

As of 09:43 a.m. London time, Monte dei Paschi (MPS) shares were down 5.74%, while Mediobanca shares were up 6.28%.

Monte dei Paschi exchanged 23 shares for 10 shares of the acquisition target, valuing Mediobanca shares at approximately 15.992 euros per share, a 5% premium to the closing price on January 23. The proposal must be approved at a shareholders’ meeting in April17.

FactSet data shows that as of the close of trading on January 23, Monte dei Paschi's equity value was 8.7 billion euros, while Mediobanca's market capitalization was 12.3 billion euros.

CNBC has contacted Mediobanca for comment.

Under the terms of the offer, Monte dei Paschi expects the deal to bring in annual pre-tax gains of 700 million euros, which will help it take advantage of tax credits from previous sustained losses and add 500 million euros each year over the next six years.

Monte dei Paschi Chief Executive Luigi Lovaglio said in a briefing that the bank intends to delist Mediobanca and hopes to complete the transaction before the end of September.

“Mediobanca is the perfect choice for a strong business combination at the perfect time,” he added. “We will harness the outstanding capabilities of both brains and maintain their unique positioning. The new Italian champion will remain resilient through a diversified business portfolio.”

KBW analysts Hugo Cruz and Ben Maher said in a note on Friday that the synergy potential and chance of success of the proposal are “limited.”

Monte dei Paschi, the world's oldest bank, needed a state bailout in 2017 after years of deep losses, but turned the tide on its fortunes under UniCredit veteran Lovaglio. The Italian government retained an 11.73% stake in the bank after reducing its stake in the bank in order to re-privatize it.

Delfin, the holding company of late billionaire Leonardo del Vecchio, has increased its stake to 9.78% since January, with business tycoon Francesco Gaetano Calta Francesco Gaetano Caltagirone currently holds 5.03%. Delfin and Caltagirone are Mediobanca's largest shareholders, holding 19.8% and 7.8% of the shares respectively.

According to CNBC, Italian banking consortium Fabi said after the acquisition offer was announced: “In the context of strong consolidation, this transaction may help to improve the dynamics of the Italian financial system.” “MPS has historically been at the center of complex events and is now Moving in an ambitious direction, this bid confirms, among other things, that MPS is fully recovered.”

Amid a favorable high-interest rate environment, Monte dei Paschi was able to pay its first dividend in 13 years last year, with a CET1 ratio (a measure of the bank's strength and resilience) of 18.3% in the third quarter.

Friday's offer intensified M&A interest in Italy's banking and financial services sector, where UniCredit, the country's second-largest bank, had previously offered to acquire all of its shares. BPM Bankthe company then sought to acquire fund management company Anima Holding. Monte dei Paschi itself was a potential takeover target for UniCredit until talks collapsed in 2021.

— CNBC’s Silvia Amaro and Ganesh Rao contributed to this report.