Credit Agricole upped the stakes in a banking battle over Italy’s Banco BPM on Friday, by using derivatives to raise its holding in the Milanese lender that has become a takeover target for UniCredit.
UniCredit last month claimed a seat at Italy’s banking consolidation table by launching an unsolicited 10.1 billion euro ($10.7 billion) all-share takeover offer for Banco BPM.
BPM has spurned it saying the near-zero premium offered does not reflect the value of the bank.
The beefed-up stake increases Credit Agricole’s bargaining power as CEO Philippe Brassac prepares to sit down with his counterpart at UniCredit, Andrea Orcel, to discuss the takeover.
Credit Agricole said it had entered derivative contracts to raise its holding in BPM to 15.1% from 9.9%, and would seek European Central Bank approval to buy up to 19.99%.
ECB approval is necessary to cross the 9.9% threshold so Credit Agricole can only settle the derivatives in shares if authorised by the regulator.
Credit Agricole ruled out a full buyout offer and said the move was in line with its strategy of selling financial products in Italy through Banco BPM’s branches.
“Crédit Agricole does not intend to launch a tender offer for Banco BPM shares,” it said.
“This transaction is consistent with Crédit Agricole’s strategy as a long-term investor and partner of Banco BPM,” it added.
Credit Agricole was already a BPM commercial partner when it became its main investor in 2022, not long after a previous failed UniCredit attempt to take over the smaller rival.
Three sources familiar with the French bank’s thinking said protecting its ability to keep distributing its products in Italy through partnerships remained the focus for Credit Agricole in dealing with the UniCredit bid for BPM.
The bank could not be reached for comment.
Credit Agricole has been expanding steadily in Italy through small acquisitions. Government sources have previously told Reuters the French bank has always reassured Rome it would not move aggressively or seek control of BPM, which is Italy’s third largest bank.
UniCredit has sparked a violent political backlash in Germany by building a large stake in Commerzbank.
UniCredit has also upset the Italian government by targeting Banco BPM at a time when the Rome Treasury was working to ease BPM’s merger with state-backed Monte dei Paschi di Siena.
In Italy, its biggest market outside France, Credit Agricole partners in consumer credit and insurance with Banco BPM. It also has a commercial accord with UniCredit through its Amundi asset management arm.
In acknowledging the price offered for BPM was low, UniCredit’s Orcel said last month there would be time to speak with all BPM shareholders to get to a “proposition that everyone is comfortable with.”
Orcel has hinted it can raise the offer with a cash top-up. This week he told investors he has time until March to hike the price.
In Credit Agricole’s case, however, discussions are expected to focus on the partnerships, the three sources said.
The Amundi contract with UniCredit runs out in 2027 and Orcel has said he wants to reduce the share of Amundi funds it sells to its clients.
In a further threat for Amundi, UniCredit has bid for Banco BPM while the latter is trying to buy Italian fund manager Anima Holding.
An acquisition of BPM after it buys Anima would give Orcel an in-house asset manager, further reducing the need for Amundi.
Orcel has been steadily working to boost UniCredit’s internal fund management capabilities and he has pledged to earn more fees now that interest rates are declining.
UniCredit had to part ways with its fund management business in 2017 to plug a capital shortfall and sold it to Amundi while signing a 10-year partnership.
Source: Reuters.com