By Valentina Za and Giuseppe Fonte
MILAN (Reuters) – UniCredit CEO Andrea Orcel has been drawing up plans to take over Banco BPM for years and was close to pulling the trigger, two sources close to the matter said.
But instead of being able to pick the right moment, UniCredit was forced to make a hasty €10 billion bid as Italy’s third-largest lender made its own mergers and acquisitions, putting Orcel’s reputation at stake.
UniCredit, which was already facing headwinds in its pursuit of Germany’s Commerzbank (ETR:), declined to comment.
BPM shares rose 12% in the week between announcing a 1.6 billion euro ($1.7 billion) bid to gain control of fund manager Anima Holding and buying 5% of Italy’s Monte dei Paschi di Siena (MPS) had bought.
That raised the prospect of a tie-up between BPM and MPS that would sideline Italy’s second-largest bank from domestic mergers and acquisitions, forcing Orcel out.
On November 22, he told a conference in London that his pursuit of Commerzbank was stalled and that he would wait for a new government in Berlin.
Just three days later, UniCredit informed the Italian market regulator before trading opened that it had launched an all-share buyout offer to BPM shareholders.
Orcel has long coveted BPM’s position in Italy’s prosperous Lombardy region, where UniCredit is weaker, but had balked at the M&A premium in its shares, a person with knowledge of its thinking told Reuters.
Now he offered a 15% premium on BPM’s share price before Anima’s offer, but virtually no premium on the share price before UniCredit’s offer. BPM said this undervalues the bank and its shares have risen to around 15% above UniCredit’s offer price.
“UniCredit has opened two fronts, both very complex. The market clearly says that the Banco BPM deal will not go through at the price offered. As time passes, the price the market demands becomes more expensive,” says banking professor at the Bocconi University. and SDA Bocconi Dean Stefano Caselli.
Orcel has indicated that it could offer BPM shareholders some money and that it would talk to ‘industrial’ investors, starting with French bank Credit Agricole (OTC:).
“Led by one of Europe’s best-known M&A bankers, UniCredit must succeed on one of two fronts,” Caselli said, adding: “That requires a bold complement to the offer. UniCredit has the money to pay and the That should simply be the case, but walking away from both deals is not an option as things stand now.”
OUT OF FAVOR
Members of Italy’s conservative government oppose Orcel’s proposal as it derails plans to join BPM and MPS to create a strong rival to UniCredit and market leader Intesa Sanpaolo (OTC:).
Orcel has been out of favor in Rome since turning down the chance to buy MPS from the state in 2021, considering the billions of euros offered to him to offset the potential risks and impact on UniCredit’s capital reserves insufficient.
Meanwhile, BPM’s largest shareholder Credit Agricole, which partners with both BPM and UniCredit to sell its products, strengthened its position last week by increasing its stake in BPM to 15%. It could increase that to 19.99%, but has ruled out a full takeover and has Rome’s informal blessing, sources told Reuters.
The French bank became BPM’s largest shareholder in 2022 after UniCredit’s aborted bid for BPM.
In a sign of possible frustration, UniCredit’s chief spokesperson on Saturday warned BPM investors against Credit Agricole’s strategy in Italy or a merger between BPM and MPS. The LinkedIn post was later deleted, removing the address for BPM shareholders.
With Italian takeover rules limiting a company’s ability to thwart a bid, BPM is examining how much leeway it has.
Meanwhile, Orcel, which is sitting on 6.5 billion euros in cash, has options to try to convince BPM shareholders that their future is better with UniCredit.
But time could be working against UniCredit as a rising BPM share price puts pressure on Orcel’s promise to its shareholders to ensure mergers and acquisitions deliver at least 15% returns.
Time can also play into Rome’s hands.
While the government does not have the power to block the BPM bid, sources told Reuters that the approval Orcel needs under investment screening rules could require a long wait, leaving UniCredit stuck in the process longer than she would like.
($1 = 0.9521 euros)
