Credit Agricole pitches Banco BPM tie-up in Italy banking shake-up (updated)

Banca Monte dei Paschi di Siena SpA

Mon 06:44

Adds whitewash detail in paragraphs 4-5, updates shares in paragraph 6
Values Banco BPM at 20% premium and offers €1 billion dividend
Credit Agricole's combined stake in BPM would rise to about 45%
French bank briefed Italian government before announcement, sources say
By Mathieu Rosemain, Giuseppe Fonte and Jakob Van Calster
PARIS/ROME, Nov 9 (Reuters) - Credit Agricole SA CAGR.PA said on Monday it had proposed merging its Italian subsidiary with Banco BPM BAMI.MI, a move that would create Italy's third-largest bank and deepen the French lender's role in a consolidation wave reshaping the Italian financial sector.
The deal would give Credit Agricole, which already holds a 29.6% stake in Banco BPM, roughly 45% ownership of the new entity. The tie-up proposal comes amid a frenzy of dealmaking in Italy's banking sector, as lenders seek greater scale to fend off rivals and avoid being left behind in a rapidly consolidating market. 
Rome has long favoured the emergence of a third domestic banking group capable of challenging market leaders Intesa Sanpaolo ISP.MI and UniCredit CRDI.MI, with Monte dei Paschi di Siena BMPS.MI viewed as a key piece in achieving that goal.
     Credit Agricole would have to secure approval under Italy's "whitewash" procedure, which would allow it to raise its stake without triggering a mandatory takeover bid for the remaining Banco BPM shares.
     The exemption from a mandatory takeover bid requires that a majority of the other Banco BPM shareholders present at an extraordinary shareholder meeting do not vote against the deal, the French lender said.
Credit Agricole shares were down around 0.6% at 1207 GMT while Banco BPM was up more than 10%, with JPMorgan saying in a note that the transaction appeared more attractive for shareholders of the Italian bank than of the French one.
     
ITALY GOVERNMENT BRIEFED BEFORE ANNOUNCEMENT
Credit Agricole briefed the Italian government before going public with the plan, three people familiar with the matter said. It moved ahead with the announcement after media reports and investor questions made it difficult to keep the project under wraps, two of the people said.
A spokesperson for Italy's Treasury declined to comment on whether Rome was still taking a neutral stance on the banking M&A wave. Banco BPM declined to comment. 
Credit Agricole, which called the proposal "friendly", added that Banco BPM Chief Executive Giuseppe Castagna would lead the merged group. 
The proposal, which has been submitted to Banco BPM's board, includes an exchange ratio reflecting a 20% valuation premium and a €1 billion ($1.1 billion) extraordinary dividend for the Italian bank's existing shareholders, Credit Agricole said.
This effectively values Credit Agricole's contributed Italian business at a discount, giving Banco BPM shareholders a larger stake in the combined group than they would receive under a merger based on an equal valuation multiple.
The combined group would generate around €800 million in annual revenue gains and cost savings, Credit Agricole said, without elaborating. It would also help lift Banco BPM's earnings per share by about 24% in 2027, it added. 
The transaction would need to clear Italy's so-called "golden power" rules, which allow Rome to intervene in transactions deemed strategically important, as well as banking and competition approvals.
Credit Agricole has steadily expanded its presence in Italy in recent years as it seeks to diversify beyond its mature French retail market. The proposed transaction could be completed in the second half of 2027, it said.
     
($1 = 0.8961 euros)

(Reporting by Mathieu Rosemain, Jakob Van Calster, Giuseppe Fonte and Mateusz Rabiega;
Additional reporting by Andrea Mandala and Augustin Turpin;
Editing by Lincoln Feast, Louise Heavens, Joe Bavier, Kirsten Donovan)
((jakob.vancalster@thomsonreuters.com))