Monte Paschi shocks Italy with 'incredible' move against bigger rivals
Monte Paschi shocks Italy with 'incredible' move against bigger rivals
(Bloomberg) — The last time Banca Monte dei Paschi di Siena SpA bought another bank, it was the beginning of a road to collapse and nationalization.
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So when Paschi made an unsolicited announcement on Friday morning to acquire larger rival Mediobanca SpA for 13.4 billion euros ($14.1 billion), the Italian financial industry was stunned. As recently as November, the government was looking for a buyer for Paschi.
“This would have been an unthinkable move just a few months ago,” said Stefano Girola, chief investment officer of FI-MEP, a family office based in Brescia, Italy. “The bank that no one wanted has put itself center stage.” .
The bold move reflects Monte Paschi's rapid transformation in recent years under the leadership of CEO Luigi Lovaglio. Some also believe the proposal could be a defensive measure against unpopular owners amid an unprecedented deal-making spree in Italy's banking sector.
Mediobanca viewed the acquisition as hostile, a person familiar with the matter told Bloomberg News. Bloomberg News reported on the potential takeover bid before it was announced. Mediobanca's shares have risen 28% in the 12 months to Friday, giving it a market capitalization of about 12.7 billion euros. During the same period, Paschi shares more than doubled in 12 months, giving it a market capitalization of approximately 8.8 billion euros.
Last year, Italy unexpectedly became the center of European banking consolidation when UniCredit SpA's unpopular bid for Germany's Commerzbank AG was followed by the Italian bank's unsolicited takeover of Banco BPM SpA. The latter move angered Prime Minister Giorgia Meloni's government, which welcomed Monte Paschi's bid as bringing much of the country's financial services industry under domestic control a way below.
Rome's finance minister, Giancarlo Giorgetti, said at an event on Friday that Rome had full confidence in Paschi's management and “they have achieved extraordinary results, they have plans and market proposals, If the market responds, we will be happy.”
Meloni can count on the support of two powerful billionaire families: the Del Vecchios family, which controls Ray-Ban maker EssilorLuxottica SA, and the family of construction tycoon Francesco Gaetano Caltagirone.
The two companies bought a large stake in Monte Paschi from the government in November and have since expanded their stakes to 9.8% and 5% respectively. They also own nearly 30% of Mediobanca.
Still, the deal is far from done. The offer represents a 5% premium to Mediobanca's share price before the deal was announced, a buffer that disappeared as Monte Paschi's shares fell 6.9% to 6.49 euros in Milan on Friday, while Mediobanca's shares rose 7.7% to 16.47 euros.
At first glance, the deal appears to have “limited chances of success,” KBW analyst Hugo Cruz said in a reaction note.
If Paschi succeeds in winning over investors, the acquisition will strengthen Roma's influence over Generali. Generali is an insurance company and a major holder of Italian sovereign bonds, with Mediobanca as its largest shareholder. Carlo Alberto Carnevale Maffe, who teaches business strategy at Milan's Bocconi University, said tighter controls would give the government greater control over “the entire banking and insurance value chain”. Influence.
Generali recently signed a preliminary agreement to merge its asset management business with French banking group BPCE. Rome officials have been looking for ways to retain Italy's influence in the deal, which is opposed by shareholder Caltagirone, which previously sought to oust Generali CEO Philippe Donnet, Bloomberg reported trade.
The proposed acquisition represents a stunning turnaround for the Siena-based bank. Founded in 1472 to finance agricultural and commercial activities, the bank later expanded throughout the peninsula, becoming one of Italy's largest banks in the process.
The story of Monte Paschi's downfall began in 2007, when it acquired Banca Antonveneta SpA from Spain's Banco Santander SA for €9 billion, more than Santander SA's Deutsche Bank paid a third more for the bank a few weeks ago. The deal took a toll on Paskey as the global financial crisis rocked Europe's economies, ultimately forcing it into years of restructuring and litigation.
The bank was first bailed out by the Italian government in 2009 and was nationalized eight years later. In 2023, Meloni's government said it would begin selling its stake in the bank as part of a massive privatization drive.
Under Lovaglio, who takes over in 2022, Monte Paschi's profitability has improved significantly, with net profit more than tripling in 2023. As he cut costs and raised interest rates, banks were able to resume paying dividends.
The acquisition will allow it to increase its wealth management business and cut annual costs by 300 million euros, Paschi said in a statement on Friday. The enlarged bank will also be able to “accelerate the use of €2.9 billion” of deferred tax assets for capital gains.
Some were surprised by Montepaschi's proposed goal, as much as they were surprised by the move itself. Morgan Stanley analysts Pamela Zuluaga and Alvaro Serrano said it was an “unexpected combination,” noting that Mediobanca focuses on asset and wealth management, consumer finance and investment banking services, while Monte Paschi relies on traditional retail and Commercial banking services.
–With assistance from Alberto Brambilla, John Dean, and Tommaso Ebhardt.
