Intesa’s bid for Monte dei Paschi di Siena restores some sanity to Italy’s M&A scene
An Intesa victory might be appealing to Prime Minister Giorgia Meloni
Italian M&A often has as much to do with politics and personalities as it does with maximising profit. That makes Banca Intesa’s proposed €30bn acquisition of Monte dei Paschi di Siena a welcome rarity.
Intesa has picked the right target, in the sense that Tuscany-based lender MPS’s standalone prospects are not great. It is grappling with the complex integration of uppity rival Mediobanca, which it acquired last year. And its governance is as fragile as they come: sparring shareholders recently ousted and reinstated chief executive Luigi Lovaglio in rapid-fire succession. MPS trades at less than its tangible book value last week, on S&P Capital IQ numbers, making it cheap by European bank standards.
Intesa is in a great position to buy. Italy’s largest bank by assets has teamed up with insurer Unipol to carve up MPS’s retail network in hopes of avoiding competition issues. Even so, it thinks it can cut €1.1bn of overlapping costs from the parts it is acquiring, on top of the €400mn MPS was hoping to save in expenses and funding costs from its acquisition of Mediobanca.
For reference, mid-market rival Banco BPM, which on Sunday wrote to MPS’s board to propose a merger of equals, only thinks it can cut €650mn from the combination. That makes Intesa’s proposed transaction one which creates a lot of value, even excluding any benefits from cross-selling products and the like.
Whether Intesa can carry MPS off at this price will largely depend on fellow Milanese lender UniCredit. The bank, led by veteran M&A banker Andrea Orcel, is engaged in a tortuous battle to buy Germany’s Commerzbank. But Orcel may be tempted to wade into this battle too, rather than watch Italian rivals get bigger in his home market. Other Italian growth options are hard to come by: Banco BPM, which Orcel recently tried to buy, is 20 per cent owned by Crédit Agricole.
Intesa will be hard to beat: it could sweeten its bid by a couple of billion without destroying value, Lex calculates. But finance does not tell the full story. Should the bank be successful, it will also end up with Mediobanca’s 13 per cent stake in insurer Generali, widely seen as a strategic Italian asset.
For that reason, an Intesa victory might also be appealing to Prime Minister Giorgia Meloni — in that it reduces the chances of Generali falling into foreign hands. The difference from other Rome-pleasing deals is that Italian capitalism would be able to consider this one a win as well.