Monte dei Paschi di Siena (MPS) has made a move in the Italian banking sector by launching a €13.3bn ($14bn) all-share buyout offer for merchant bank Mediobanca reported Reuters.
This proposal marks a key step in the ongoing consolidation of Italian banks and comes after previous unsuccessful attempts by the government to privatise MPS through partnerships.
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The deal intensifies with MPS offering 23 of its shares for every 10 shares of Mediobanca, representing a 5% premium over the last closing price.
MPS CEO Luigi Lovaglio, who led the bank’s turnaround, described the bid as “friendly” and intends to preserve the Mediobanca brand within investment banking.
Luigi Lovaglio was quoted by Reuters as saying: “We have no plans to make Mediobanca disappear. I don’t even have the skills to be a CEO of an investment banking business.”
Despite this move, early market reactions have been lukewarm, with MPS’s shares dropping over 9% in early trading.
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By GlobalDataMediobanca is said to havea strong position in investment banking, wealth management, and consumer finance with a market valuation of €12.7 bn surpassing that of MPS having valuation of €8.8bn.
However, MPS holds €3bn in tax credits which could significantly boost profits over the next six years and is aiming for a 100% dividend payout ratio.
The offer follows recent changes in MPS’s shareholder structure, with Delfin and Francesco Gaetano Caltagirone acquiring substantial stakes.
Delfin is currently Mediobanca’s largest shareholder with a 19.8% stake, followed by Caltagirone at 7.8%.
MPS has seen its share value more than triple since November 2022 following CEO Lovaglio’s successful capital increase to fund staff layoffs and cost-cutting measures.
With interest rates projected to decrease, banks are seeking alternative revenue sources.
Lovaglio said: “Even if it is something that is difficult … there is a strong rationale. We will have a combination of revenues that will make us stronger … to face a landscape that can be even more difficult than the current one.”
Mediobanca, under CEO Alberto Nagel’s leadership, has transitioned towards wealth management but faces criticism from major shareholders Delfin and Caltagirone for over-reliance on income from insurer Generali.
The proposed acquisition would take Mediobanca private and is expected to yield pre-tax benefits of €700m annually.
The exchange deal is anticipated to be finalised by the end of September.
Caltagirone and Delfin also hold significant shares in Generali, which when combined with Mediobanca’s stake, accounts for nearly one-third of Generali’s capital base.
Meanwhile, Italy has reduced its holding in MPS to 11.7%, down from an initial 68%.
With UniCredit having abandoned its pursuit of MPS in favour of Banco BPM, MPS’s bid for Mediobanca could potentially thwart BPM’s defensive strategies against UniCredit’s takeover intentions.
