How Mediobanca fell prey to Monte Dipas

Little was known about it when Italian financial power broker Mediobanca helped its long-time client Monte dei Paschi di Siena structure a raise-or-bust capital raise in 2022 will ultimately become a takeover target for the former poster boy for the country's failed banking system.

MPs surprised investors on Friday by paying a full €13.3 billion bid to rival its larger rival.

The takeover bid by the lender, which remains partly government-owned, represents another shock to Italy's banking system, the latest in a series of back-to-back deals that could reshape the country's financial landscape.

“This is the final battle between Roman (politics) and Milanese finance,” one government official said.

Since taking power in late 2022, Giorgia Meloni's right-wing government has cast itself as market-friendly with priorities to allay observers' fears that it will adopt a heavy-handed nationalist approach to business and finance. policy.

But a series of interventions in the financial sector – including attempts to engineer the sale of MPs to BANCO, BPM's controversial amendments to the country's capital markets legislation last year, and public statements targeting “international speculators” have reignited the Such concerns.

A senior banking executive in Milan said: “It is simply inconceivable that a commercial lender – whose largest single shareholder is the government – would launch a larger investment banking rival with zero premium and no clear strategic objectives. takeover attempt.”

Following the lender's successful turnaround, Italy has been reducing its stake in the MP, who was released in 2017, to meet an EU pledge to return the world's oldest bank to private hands.

However, the state remains the largest single shareholder, with a stake of more than 11% – and MPs appear to be playing an increasingly important role in the government's efforts to create a new center of financial power.

Last year, Meloni's government wanted to merge the Tuscan lender, once a symbol of Italy's left-wing party's financial clout, with Banco BPM to create a large domestic banking hub.

Known as the “third pole”, the goal is to expand the lender to compete with larger rivals Unicredit and Intesa Sanpaolo and maintain a strong Italian footprint.

Unicredit's takeover bid for Banco BPM in November thwarted those plans and left the government scrambling to hit back with its latest move against chief executive Andrea Orcel.

Insiders now say that MPs' action against Mediobanca shows that Meloni's government has given up hope that UniCredit can be stopped and accepts that it must find an alternative to BPM for integration.

Congressman Luigi Lovaglio said on Friday that the takeover offer was “an industrial project that we have been considering since 2022”.

“We will create a third banking group in the country,” Lovaglio said, calling the move “courageous,” “innovative” and “friendly.” Insiders say that’s not the case with Madibaka’s chief, Alberto Nagel.

“Obviously, the takeover bid is a market transaction,” Meloni told reporters on Saturday. “The only thing I noticed is that institutions and citizens have seen this as a problem before and it's a very healthy bank that launched the ambition A thriving business that should make us proud.”

Replacing BPM with Mediobanca and turning the MPs into buyers rather than targets also presents a new opportunity for Rome: to leverage the links established with two Italian corporate giants and extend its reach to the insurance group General, a A large investor in Italian public debt, and a 13% share is owned by Mediobanca.

At the latest MP stock auction in November, the government sold most of its remaining holdings to Delfin, the holding company of the billionaire Del Vecchio family, Building Tycoon Francesco Gaetano Caltagirone and BPM.

Caltagirone holds 7.8% of Mediobanca and 6.9% of Generals along with their new stake in MPs. Delfin has 9.9% of Generals and 19.8% of Mediobanca.

Caltagirone and Delfin had long been at odds with Nagel and the general chief Philippe Donnet, but failed to replace them.

Generali's decision to enter into an asset management joint venture with France's Natixis, first reported by the Financial Times in November and announced on Tuesday, further aligns Roma with Caltagirone.

Meloni's allies have increasingly raised concerns about the risks to Italy's savings, while refinancing Italy's massive public debt could face future hurdles.

This concern resonates with Italian institutions as well as Caltagirone. Representatives on his council of generals voted against the deal, according to people familiar with the matter.

Insiders saw Caltagirone behind MPS' move to Mediobanca rather than the hands of MPS boss Lovaglio. In their remarks, it was part of a wider attempt to take control of General and Overhaul's business and management, which the late billionaire Leonardo del Vecchio launched several years ago. look. Caltagirone's son Alessandro is a newly appointed member of the MP's board of directors.

People close to Caltagirone, people close to MPs deny the direct or indirect involvement of the Roman tycoon in the deal.

A merger between Mediobanca and MPS would help resolve long-standing complaints from Caltagirone and Delfin, while also giving Roma a seat at the country's most prestigious and influential financial table.

There is no certainty that a transaction will occur. Shares of Congressman fell 7% on Friday, while Madibaka's shares rose nearly 8%.

Analyst responses were muted. Marco Nicolai of Jefferies noted that synergies between the two banks are limited and the risks are high. He added: “Cultural differences between the two firms may lead to revenue shortfalls, particularly in investment banking and wealth management.”

“Our first impression is that this offer has a limited chance of success,” KBW analyst Hugo Cruz said.

But people close to MPs believe Madi Baca has “hang on for too long” and is too reliant on dividends, a long-standing criticism of the Milan-based bank.

“The road ahead is long and winding, not only for MPs but for the Italian banking industry as a whole: many moving parts, many unknowns and too many actors involved,” one CEO said.