Italy’s Banco BPM on Tuesday rejected domestic rival UniCredit’s €10.1 billion bid to acquire it, saying the price point does “not reflect in any way the underlying profitability and the additional potential for value creation” for its shareholders.
UniCredit’s offer Monday amounted to a 0.5% premium over BPM’s closing stock price from Friday. But news of the arguably unsolicited bid spiked BPM’s trading value such that, compared with Monday’s closing price, UniCredit’s offer represents a 7.6% discount, BPM said in a statement Tuesday.
Further, UniCredit’s bid would trigger Italy’s passivity rule, which stipulates that a company targeted for acquisition cannot take strategic actions such as another merger, a capital increase or change in governance.
BPM launched a €1.6 billion bid to buy out asset manager Anima Holdings on Nov. 6 and, a week later, bought a 5% stake in Monte dei Paschi di Siena from the Italian government. The passivity rule would curtail BPM’s ability to revise its terms on either of those deals – especially considering UniCredit said Monday it aimed for a BPM deal to close by June 2025.
BPM on Tuesday called the Anima and MPS offers “extraordinary transactions,” adding that the bank is “focused” on its 2023-26 implementation plan, the targets for which would need to be revised in light of those two deals.
BPM CEO Giuseppe Castagna dug in further Wednesday, telling employees a UniCredit deal would mean more than 6,000 job cuts at the acquired bank, according to a letter seen by Reuters, noting that UniCredit planned to cut costs by more than one-third.
“We are a big autonomous bank, an Italian bank with a strong vocation of being close to our regions and to the small and medium-sized companies that make up the backbone of our country," Castagna wrote in the letter.
BPM’s board Tuesday noted that a UniCredit deal would result in “a significant dilution of Banco BPM's current geographic footprint.” Rather than concentrating its brick-and-mortar presence in wealthy Lombardy – home to Milan – a UniCredit deal would force a pivot toward “geographical areas now characterized by lower growth and higher geopolitical risk,” BPM said.
Ahead of Tuesday’s BPM board meeting, director Mauro Paoloni told reporters that UniCredit’s takeover bid was “hostile,” according to the Financial Times.
UniCredit CEO Andrea Orcel, however, informed Banco BPM Chair Massimo Tononi on Sunday and government representatives in Rome of his intention to bid for the bank, according to Bloomberg. BPM, however, said Tuesday the offer “was in no way agreed upon in advance with the bank.”
Italy’s finance minister, Giancarlo Giorgetti, suggested the country might engage so-called “golden power rules,” which allow the government an opinion on certain business combinations – and the right to impose conditions on UniCredit.
Giorgetti referenced UniCredit’s recent advance on Commerzbank, in which the Italian lender in September bought a percentage of the German bank, then used derivatives contracts that could push that stake to 21%.
“As [military strategist] Carl von Clausewitz said, the safest way to lose the war is to engage on two fronts,” Georgetti said Monday, according to the Financial Times.
Orcel said the government’s reaction was “to be expected, and it’s correct to evaluate.”
UniCredit’s Monday offer for BPM appeared to catch other authorities off guard.
"I thought UniCredit wanted to grow in Germany. I don't know why it changed its mind," he told reporters, according to Reuters.
Orcel on Monday reiterated that his investment in Commerzbank was “not a deal,” while the BPM offer is “a transaction.”
BPM, too, referenced Commerzbank in its statement Tuesday, saying UniCredit’s offer exposes stakeholders “to the uncertainty associated with the outcome of the expansion initiatives … in Germany.”
On Sunday, Germany’s new finance minister said he “assumed” a UniCredit-Commerzbank deal wouldn’t go through. The German lender responded to UniCredit’s advances by naming a new CEO and floating more ambitious growth targets.
Orcel has said the BPM deal is his strategic priority, noting that, pending the outcome of Germany’s February snap election, any move on Commerzbank can wait. UniCredit’s derivative positions in Commerzbank don’t expire until 2026.
“With [BPM] and the Commerzbank deal facing obstacles, UniCredit will feel pressure to get at least one deal over the line,” Morningstar analyst Johann Scholtz wrote in a note Monday. “UniCredit’s management must, however, be disciplined not to overpay.”
Contrary to BPM’s assertion, Scholtz characterized UniCredit’s 0.5% premium as “steep … compared to where BPM has traded historically.”
“We can see UniCredit throwing in maybe another 10% as a sweetener,” Scholtz said.
Still, the primary concern for some Italian lawmakers was BPM’s acquisition of 5% of Monte dei Paschi di Siena – which could be affected under the passivity rule.
“I wouldn’t want to think that someone is trying to stop [a BPM and MPS union],” Deputy Prime Minister Matteo Salvini said Monday.
The Italian government, which sold 15% of MPS this month, has actively looked to grow BPM, the nation’s third-largest bank, into a force that could compete with UniCredit and its larger rival, Intesa Sanpaolo.
When BPM bought its stake in MPS on Nov. 14, JPMorgan researchers predicted “with lower interest rates ... we would not completely rule out a takeover of MPS by Banco BPM in a year's time.”
BPM, however, said it’s not planning to raise its stake in Paschi above 10%, Bloomberg reported.
Castagna, the BPM CEO, told Italian daily Il Sole 24 Ore this year that his bank would “continue growing on its own.” Domestic M&A “would be on standby for at least 18 to 24 months,” he added at the time.
Rony Hamaui, a professor at Milan’s Università Cattolica, said BPM “lacked the courage to [play buyer] and now they must counterattack, which isn’t easy,” the Financial Times reported.
Orcel, meanwhile, said the deal for BPM, which he last considered buying in 2022, “has been awaited for years … but deals that touch the banking system are always complex.”
