Monte dei Paschi di Siena (MPS) and Banco BPM are intensifying efforts to finalize a merger plan, with their respective Boards of Directors potentially meeting this week, ahead of scheduled August 5th and 6th earnings calls. This accelerated timeline is driven by the need to counter Intesa Sanpaolo's unsolicited offer for MPS, which was filed with Consob on June 27th and is valued at $30.6 billion, equating to $10.091 per share. Intesa's proposal offers 1.6 Intesa Sanpaolo shares plus $1 in cash for each MPS share, representing a 12.5% premium, and has been reportedly well-received by major investors, with analysts like Kepler and Equita deeming it highly attractive and without real alternatives.
MPS CEO Luigi Lovaglio and Banco BPM CEO Giuseppe Castagna are aiming for a "merger of equals" that would include a cash component to entice shareholders away from Intesa's bid. To finance this, they are looking to divest a portion of the 13% stake in Assicurazioni Generali held through Mediobanca. This sale could fund a substantial special dividend for shareholders of the combined entity. However, the path is fraught with obstacles, including potential legal challenges related to a Mediobanca operation involving Lovaglio set to be heard in Milan, and the critical role of Crédit Agricole.
Crédit Agricole, which recently increased its stake in Banco BPM to 29.3%, holds significant sway over the success or failure of the merger. While Crédit Agricole's board members voted in favor of the merger at Banco BPM, there are concerns about the strategic implications of a French bank becoming a dominant shareholder in a new combined Italian banking powerhouse that would also include stakes in Anima and Generali. The proposed merger also faces challenges with the "passivity rule" that prohibits MPS from undermining Intesa's offer, though Mediobanca, as a controlling entity of MPS, might have more flexibility. The two banks are also seeking approval for the "Danish Compromise" to alleviate capital absorption.
Despite the complexities and the fact that a "merger of equals" might be challenging given MPS's current market capitalization being $11 billion higher than Banco BPM's, Lovaglio views this combination as the only viable industrial option to preserve MPS's heritage and strengthen its market position. Barclays analysts suggest that if MPS were to sell its Generali stake, it could distribute a special dividend of $7 billion, rewarding shareholders who support the merger with Banco BPM and providing strong competition to Intensa's offer.
