UniCredit Shakes Up Italian Banking with €10 Billion Bid for Banco BPM

Italian banking giant UniCredit has launched an unexpected €10 billion ($11 billion) takeover bid for domestic competitor Banco BPM, marking a bold move in the ongoing consolidation of Italy’s banking sector. The announcement, made on Monday, comes as CEO Andrea Orcel prioritizes local expansion over potential ventures into foreign markets, such as Germany’s Commerzbank, according to Reuters.

Orcel attributed the timing of the bid to a shift in Italy’s banking landscape, following Banco BPM’s recent purchase of a stake in Monte dei Paschi di Siena (MPS) and its bid for fund manager Anima Holding. “We cannot remain absent from that move,” Orcel stated, while reaffirming that UniCredit remains uninterested in MPS, which it previously declined to acquire from the Italian government in 2021.

Government Scrutiny and Political Sensitivities

The proposal has drawn attention from Italy’s government, which intends to assess the bid under rules designed to protect key national assets. Economy Minister Giancarlo Giorgetti signaled caution, remarking, “The safest way to lose the war is to engage on two fronts,” though he left room for interpretation with the ambiguous comment, “Then, who knows.”

The bid also highlights broader political resistance to cross-border banking mergers in Europe, with Germany and Spain recently blocking similar consolidation efforts. Per Reuters, Berlin opposed Orcel’s earlier interest in Commerzbank, while Spain stymied BBVA’s pursuit of Sabadell.

Shareholder Engagement and Deal Terms

UniCredit’s all-stock offer values Banco BPM at a 0.5% premium to its closing price last Friday, or 15% above its valuation prior to BPM’s Anima Holding bid announcement. Orcel emphasized the strategic benefits of the merger, including €1.2 billion in annual pre-tax synergies, largely from cost reductions.

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In appealing to Banco BPM’s shareholders, particularly industrial investors, Orcel argued that the combined entity would provide stronger financial returns in a low-interest-rate environment. Banco BPM’s largest investor, France’s Crédit Agricole, is expected to play a pivotal role in discussions, with BPM’s board set to begin reviewing the proposal on Tuesday.

While Orcel did not rule out adding a cash incentive to the bid, such as the one Intesa Sanpaolo used in its acquisition of UBI in 2020, he maintained confidence in the transaction’s financial appeal. He pointed out that respective valuations and merger benefits could deliver UniCredit’s targeted return on investment of at least 15%.

A History of Strategic Moves

This isn’t the first time UniCredit has pursued Banco BPM, rooted in Milan’s prosperous Lombardy region. Previous attempts to combine forces were abandoned, but Orcel argued that the partnership is a logical step given the current market dynamics. “I don’t think there is a big surprise at this choice of partner here,” he noted, underscoring his preference for targeted domestic deals over complex international ventures.

Since assuming leadership of UniCredit in 2021, Orcel has focused on revamping the bank’s performance, achieving a nearly five-fold increase in its share price.

Source: Reuters