How Italy's MPS went from near collapse to bid for revered merchant bank

Caltagirone Editore SpA

24/01/2025 17:53

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      MPS shares more than tripled from 2 euros in late 2022
    

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      Govt supportive, looks with concern at Generali-Natixis 
    

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      MPS CEO focused on industrial reasons for deal
    

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      Mediobanca an option since 2022, but conditions not right
    

  
    By Valentina Za, Gianluca Semeraro and Mathieu Rosemain
       MILAN, Jan 24 (Reuters) - Monte dei Paschi (MPS) CEO
Luigi Lovaglio has pulled several all-nighters since arriving in
Siena in early 2022, when Italy's Treasury picked him out to
revive the fortunes of the world's oldest bank, five years after
bailing it out.
    Back in October 2022 he worked through the night to pull off
a share sale, as MPS's  BMPS.MI  seventh cash call in 14 years
sparked last-minute panic among banks underwriting it. MPS
struggled to sell shares at 2 euros each back then.
    MPS stock traded at 7 euros this week when Lovaglio and his
finance chief Andrea Maffezzoni have emerged from two
all-nighters that ended in them launching a 13.3 billion euro
($14 billion) all-share takeover bid for larger rival Mediobanca
 MDBI.MI , Italy's historic investment bank.
        More than 10 billion euros in cash between 2017 and 2022
have allowed MPS to clean up its balance sheet in time for the
bank to seize the profit boost from higher rates and jump on the
consolidation train racing through the Italian sector.
  
        MPS, which once threatened to spread contagion across
the industry, is bidding for a bank that for decades held sway
over Italy's financial arena.
    Lovaglio, 69, appeared conscious of his bold move and sought
to strike a conciliatory tone on Friday.
    "We don't want to take any action that can in some way make
weaker the powerful organisation that Mediobanca is," he told
analysts.
    
    THE ODD COUPLE
    Analysts fretted "the odd couple" of Mediobanca and MPS had
in common little more than two significant shareholders: Delfin,
the holding company of late billionaire Leonardo Del Vecchio,
and fellow tycoon Francesco Gaetano Caltagirone. 
        International funds have piled into MPS over the past
two years as the Treasury cut its stake to 11.7% from 68%. The
surprise bid sparked a sell-off, with MPS shares closing down
7%.
  
        A person involved in the deal said advisers UBS and
JPMorgan would set to work to explain the deal to investors and
dispel concerns it could just reflect the shareholders' secret
agenda.
  
        Delfin and Caltagirone also own stakes in Italian
insurer Generali  GASI.MI , and have for years accused
Mediobanca CEO Alberto Nagel of relying excessively on income
from Mediobanca's stake in Generali.
    Delfin and Caltagirone this week opposed Generali's asset
management tie-up with France's Natixis Investment Managers. 
    They found an ally in the government, which is concerned
about savings shifting outside of Italy.
    At the same time, the government's resolve to help build a
third big banking group in Italy to rival Intesa Sanpaolo and
UniCredit strengthened. 
    Rome had thought it was headed in the right direction when
in November it sold shares in MPS to Banco BPM, Italy's third
largest lender, as well as Delfin and Caltagirone. 
    But late last year, UniCredit made a surprise bid for Banco
BPM, thwarting Treasury's efforts to encourage, with help from
Delfin and Caltagirone, a tie-up between MPS and BPM.
    
    SACRED
    Lovaglio on Friday said he had presented Mediobanca as a
merger option for MPS to Italy's economy minister back in
December 2022, alongside plans for more plain-vanilla tie-ups
with peers.
    Since then, it had become widely known that mid-sized rivals
Banco BPM and BPER  EMII.MI  were potential candidates for MPS.
        Only the recent emergence of Delfin and Caltagirone as
major MPS investors put Mediobanca on the map of potential
deals.
  
        A person involved in the bid's preparation said that
Mediobanca was "such a sacred name" in Italian finance that it
was natural to keep any tie-up ambitions secret until they could
have a chance of success.
  
    Rome on Friday threw its support behind MPS's bid for
Mediobanca, with two people close to the matter saying the
Natixis-Generali combination may have played a role in cementing
the government's support for the plan.
    A third person involved in the bid, however, said Lovaglio's
reasons for the deal were purely industrial and based on the
need to find MPS a partner and how complementary the two
businesses could be.    
    "We're besides ourselves," a senior MPS employee at a Siena
branch told Reuters on condition of anonymity. "This deal would
be so perfect for our franchise." 
    So far, however, Mediobanca CEO Nagel has rebuffed attempts
to open a dialogue with MPS and is preparing to fight against
the offer, two people with knowledge of the matter said. 
    Mediobanca has not commented on the bid.
    
 
($1 = 0.9541 euros)

 (Reporting by Valentina Za and Gianluca Semeraro in Milan;
Mathieu Rosemain in Paris; Editing by Jane Merriman, Tommy
Reggiori Wilkes and Louise Heavens)
 ((valentina.za@thomsonreuters.com; +39 02 6612 9526;))