Business
Italy’s next bank deal hangs on time and UniCredit
Italy’s next bank deal hangs on time and UniCredit
About this update from Banco Bpm Spa
By Neil UnmackLike buses, investment bankers can wait ages for a deal, and then two come at once. Luigi Lovaglio, the returning CEO of Banca Monte dei Paschi di Siena MIL:BMPS, recently cemented his role after a boardroom putsch. It gives him license to fully integrate the recently purchased Mediobanca, and potentially even make a move on 19-billion-euro Banco BPM MIL:BAMI. The key variables are time – and UniCredit’s MIL:UCG Andrea Orcel.A possible tie-up between Lovaglio-led Monte dei Paschi and BPM has been the talk of Milan for many months, not least because the government may favour it, according to Reuters reporting. A deal would create a group worth 46 billion euros, at current market values. While still much smaller than Intesa Sanpaolo MILSEDEX:I05395 and UniCredit, at 100 billion euros each, the combined entity would approximate a credible “terzo polo” or “third pole” in Italian banking. Assume cost savings equivalent to 30% of BPM’s operating expenses, or 900 million euros, and the marriage could create some 6 billion euros of value, after taking off tax and capitalising the annual figure.Yet Lovaglio only just acquired Mediobanca, and has yet to delist it. He probably needs at least six months to finish the merger and show that he can integrate the businesses without losing Mediobanca’s core investment banking staff. That may even raise Monte dei Paschi’s own valuation, creating a more valuable M&A currency. It currently trades at 1.2 times forward tangible book value – well below most other Italian banks and BPM.Another obstacle is Crédit Agricole. The French bank has a 20% BPM stake and four board seats. It could make life difficult for any Monte dei Paschi deal: Crédit Agricole, worth 50 billion euros, has much more firepower than the 28-billion-euro bank run by Lovaglio. He may therefore have to get the French bank onside by offering any branches that would be sold after the merger, boosting Crédit Agricole’s Italian business.Then there is Orcel. UniCredit tried to buy BPM very recently, only to be thwarted by the government, and danced with Monte dei Paschi a few years ago. The danger, for Lovaglio, is that Orcel tries again. Monte dei Paschi might be a more attractive target since it would come with Mediobanca’s pedigree investment bank.Orcel is currently tied up pursuing Germany’s 39-billion-euro Commerzbank XETR:CBK. But if Berlin cont...