In a defensive gambit to fend off a potential acquisition by Intesa Sanpaolo SpA, Banca Monte dei Paschi di Siena SpA has launched all-share offers for both Banco BPM SpA and Banca Generali SpA, totaling €34 billion ($40 billion).
The all-share offers, based on closing prices from two days prior, value Banco BPM at €25.3 billion and Banca Generali at €8.7 billion, as stated in Friday's announcement. CEO Luigi Lovaglio said during a conference call that the offers "are not conditionally linked," which means either deal can move forward independently.
This aggressive move reflects Lovaglio's determination to block an Intesa takeover after Intesa made its own offer just over two months earlier. An earlier effort by Monte Paschi to combine with Banco BPM on equal terms had collapsed, eliminating what had seemed to be Lovaglio's preferred defense.
Should the deals succeed, Lovaglio would establish a significant new Italian lender worth roughly €70 billion by market value, holding around €450 billion in assets. That bank would be the only domestic institution to come anywhere close to the scale of Italy's two dominant lenders, Intesa and UniCredit.
According to Square Global Markets' special situations co-head Nicolas Marmurek, "Monte Paschi has gone from defense to double-or-nothing. The idea is to make Intesa's offer look like a breakup bid against a larger national banking platform."
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Monte Paschi's counteroffensive caps a long and difficult chapter for the Siena-based lender. The bank has leaned on state support since a 2017 rescue and has spent years working through restructurings and asset disposals. Intesa's approach, made just over two months ago, threatened to end that independence, and the collapse of the earlier BPM plan left Lovaglio with few obvious moves left.
Still, large obstacles remain.
Note: Market values are rounded as of Aug. 20. MPS = Monte Paschi, BPM = Banco BPM, BGN = Banca Generali. The combined figure is illustrative.
Buying Banca Generali would boost MPS's wealth-management business, whereas Banco BPM would broaden its footprint across Italy's affluent north.
In Milan trading, MPS shares were barely moved, Banco BPM dropped up to 1.2%, while Banca Generali declined 3.4%, a sign of investor doubt. At mid-morning, the BPM bid was worth about €28 billion, above its current market capitalization of €25.2 billion. The Banca Generali offer was €9.6 billion, compared with a market value of about €7.8 billion.
Either deal faces substantial hurdles on its own.
This double-bid strategy is a bold shift for Monte Paschi after years of restructuring and state support. If successful, MPS would become a more diversified national group with new strength in wealth management and retail banking in northern Italy. If the deals fail, MPS may have fewer alternatives left to escape Intesa's advance.
The market's subdued response shows investors are not fully confident. Regulators are likely to scrutinize the size and structure of the plan, but Lovaglio has signaled he is ready to take major risks to keep Monte Paschi independent.
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