Italy’s UniCredit on Monday launched a surprise 10 billion euro ($11 billion) bid for domestic peer Banco BPM, which CEO Andrea Orcel said would take precedence over any potential move on Germany’s Commerzbank.
Orcel told investors the unsolicited offer had been prompted by Italian banking consolidation heating up after Banco BPM this month bought a stake in state-backed Monte dei Paschi di Siena (MPS) and launched a bid for fund manager Anima Holding.
“We cannot remain absent from that move,” Orcel said, adding however that UniCredit still had no interest in MPS after walking away from taking the bailed-out peer off the state’s hands in 2021.
Economy Minister Giancarlo Giorgetti told reporters the government would review the bid under rules designed to give Rome power to shield key assets.
“The safest way to lose the war is to engage on two fronts,” Giorgetti said. “Then, who knows.”
Italy’s reaction, after Berlin raised barricades against Orcel’s ambitions for Commerzbank and Spain opposed BBVA’s bid for Sabadell, highlights the political resistance to creating the bigger banks Europe mostly lacks.
The all-share proposal offered virtually no premium to Banco BPM’s share price, and Orcel said he was keen to engage with shareholders, particularly ‘industrial’ ones, to find solutions.
Banco BPM, whose main investor is France’s Credit Agricole, said its board would start discussing the bid on Tuesday.
The proposal follows previous aborted attempts by UniCredit to move on its rival rooted in Milan’s wealthy Lombardy region.
“I don’t think there is a big surprise at this choice of partner here. There shouldn’t have been on Commerzbank, there should be even less on BPM,” Orcel said.
With rates going down and profits compressing, Banco BPM’s shareholders are better off holding UniCredit shares and reaping 1.2 billion euros a year in pre-tax merger benefits, mostly from cost cuts, Orcel said.
He appeared not to rule out UniCredit considering the kind of cash sweetener Intesa Sanpaolo offered when it bought BPM’s rival UBI in 2020.
Veteran dealmaker Orcel has said he would seek acquisitions since taking the reins at UniCredit in 2021, but first focused on driving a near five-fold increase in its share price.
Orcel said respective valuations meant that UniCredit could secure the desired return on investment in BPM of at least 15%.
UniCredit is offering 0.175 of its common stock for each BPM share, providing a premium of 0.5% to Friday’s closing price, or 15% to the day before BPM announced its offer to gain full control of Anima. Intesa offered a 28% premium for UBI, which it later raised to 45%.
WHY NOW?
Orcel rocked Europe’s financial industry in September by unveiling UniCredit’s stake in Commerzbank, a move that sparked widespread opposition in Germany and speculation about if, when and how Orcel would try to buy all the Frankfurt-based bank.
On Monday Orcel addressed potential concerns about UniCredit engaging on two separate fronts at once.
“By the time we would have closed the second bid, we would have integrated the first bank,” the former investment banker said.
“There is no management stretch,” he said, adding: “Why now? We’re free. We’re not doing anything else.”
Commerzbank shares slid 6% in Frankfurt, while in Milan UniCredit shares fell 4% and BPM shares rose 3%.
The near 21% stake in Commerzbank, built in part with derivatives conditional on supervisory approval, “remains an important investment”, UniCredit said.
With its economy in a bind, Germany has backed Commerzbank staying independent, saying a takeover would cause job losses and expose the lender to Italian sovereign risk.
On Friday, Orcel said discussions around a possible Commerzbank acquisition would need to wait until the new German government is established next year.
“Out of respect for Germany and their elections … there would have been no base or ability to move in the short term. And maybe there won’t be an ability to move at all,” he said.
The BPM Banco move took Commerzbank by surprise, according to two people familiar with the matter. One said that while it could signal that a Commerzbank takeover was less likely, the move was hard to interpret.
FEE FOCUS IN ITALIAN CONSOLIDATION
Banco BPM, Italy’s third-largest bank, this month bought 5% of MPS from the Treasury, which has long wished the two mid-sized lenders could combine as the state pulls out of MPS.
BPM also this month launched a 1.6 billion euro buyout offer for Anima as it seeks to boost net fees, a priority also for Orcel.
The deal with Banco BPM, which must receive European Central Bank and antitrust approval, could be concluded by June 2025, UniCredit said.
It is also waiting for ECB approval to potentially buy up to 29.9% of Commerzbank. BPM did not immediately respond to a request for comment.
Source: Reuters.com