When Italian financial broker Mediobanca helped its long-time client Monte Dei Paschi di Siena in 2022, little did it know that it would ultimately become a takeover target for the former poster child of the country’s failed banking system.
On Friday MPs stunned investors by launching a €13.3bn all-share offer for its bigger rival at a premium of just 5 per cent MediobancaThe closing price a day before.
The takeover bid from a lender still partly state-owned represents another shock to Italy’s banking system, the latest in a series of back-to-back deal attempts that could reshape the country’s financial landscape.
“This is the final battle between Roman (politics) and Milan finances,” a government official said.
Since Giorgia Meloni’s right-wing government took power in late 2022, it has made it a priority to portray itself as market-friendly, easing observers’ fears of using a hardline nationalist approach to business and financial policy.
A series of interventions in the financial sector – including an attempt to engineer the sale of MPs Banco BPM last year and controversial changes to the country’s capital market legislation – as well as public statements against “international speculators” – have reignited such concerns.
“It is simply unfathomable that a commercial lender whose (largest individual shareholder) is the government would attempt a takeover of a larger investment banking rival with a zero premium and without a clear strategic objective”.
After the lender’s successful turnaround, Italy has staked its stake on MPs – which it bailed out in 2017 – to meet EU obligations to return the oldest bank to private hands.
But the state remains the largest single shareholder, with a stake of more than 11 percent – and lawmakers appear to be playing an increasingly important part of the state’s efforts to create a new center of financial power.
Last year, Meloni’s government hoped to merge the Tuscan lender, once a symbol of the financial clout of Italy’s left-wing parties, with Banco BPM creating a major domestic banking hub.
Dubbed the “third pole”, the target was the enlarged lender, competing with larger rivals Unicredit and Intesa Sanpaolo and maintaining a strong Italian footprint.
Unicredit’s takeover bid for Banco BPM in November thwarted those plans and left the government scrambling to counter CEO Andrea Orcel’s eventual maneuvers.
Insiders now say that the MPs’ move on Mediobanca shows that Meloni’s government has given up hope that Unicredit can be stopped and accepts that it must find an alternative to BPM for its consolidation efforts.
On Friday, MPS CEO Luigi Lovaglio said the takeover offer was “an industrial project that we have been thinking about since 2022.”
“We will create the third banking group in the country,” Lovaglio said. He called the move “brave,” “innovative” — and “friendly.” Insiders say that Mediobanca boss Alberto Nagel doesn’t see it that way.
“Obviously the tender offer is a market transaction,” Meloni told reporters on Saturday. “The only thing I note is that MPs, previously seen as a problem by both institutions and citizens, are a perfectly healthy bank that is launching ambitious operations and this should make us proud.”
Replacing BPM with Mediobanca and turning MPs into buyers instead of Target also offers Rome a new opportunity: to exploit connections fake with two giants of the company’s Italy and the reach of insurance group Generali – a major investor in the Italian public debt and one extend, and one extend through the insurance group 13 percent owned by Mediobanca.
In MPs’ most recent auction in November, the government sold significant chunks of its remaining stake in Delfin, the holding company of billionaire Del Vecchio’s family, construction tycoon Francesco Gaetano Caltagirone and BPM.
Together with its new stakes in MPs, Caltagirone owns 7.8 percent of Mediobanca and 6.9 percent of Generali. Delfin has 9.9 percent of Generali and 19.8 of Mediobanca.
Both Caltagirone and Delfin have long had strategy with Nagel and Generali boss Philippe Donnet at odds with failed bids to replace them.
Generali’s decision to enter an asset management joint venture with France’s Natixis, first reported by the Financial Times in November and announced on Tuesday, further aligned Rome with Caltagirone.
Meloni’s allies raised concerns about Italian austerity abroad and the refinancing of Italy’s huge public debt could face hurdles in the future.
Such concerns were felt throughout the Italian establishment and with Caltagirone. His representatives on the Generali board voted against the deal, according to people with knowledge of the deliberations.
Insiders see Caltagirone’s hand behind MPS’s move to Mediobanca and not that of MPS boss Lovaglio. In their statement, it is part of a broader attempt to take control of Generali and overhaul Mediobanca’s business and management, something late billionaire Leonardo del Vecchio had envisioned years before. Caltagironon’s son, Alessandro, is a newly appointed member of the Board of Deputies.
People close to Caltagirone and people close to MPs denied the Roman tycoon’s direct or indirect involvement in the transaction.
A merger between Mediobanca and MPs would help resolve Caltagironon and Delfin’s long-standing grievances while giving Rome a seat at the country’s most prestigious and influential financial tables.
There is no certainty that a deal will take place. Shares in MPs closed up 7 percent on Friday, while shares in Mediobanca rose almost 8 percent.
Analysts’ responses were muted. Jefferies’ Marco Nicolai noted that synergies between the two banks were limited and risks were high. “Cultural differences between the two companies could lead to revenue dis-synergies, particularly in relation to investment banking and asset management,” he added.
“Our first impression is that this offer has limited chances of success,” said KBW analyst Hugo Cruz.
But people close to the MPs argued that Mediobanca had “stood still for too long” and was overly reliant on its dividend from Generali, a long-standing criticism of the Milan bank.
“The road ahead is long and funny, not just for MPs but for the entire Italian banking sector: many moving parts, many unknowns and too many actors involved,” said one executive.
