BPM calls off merger with MPS. The French have other plans

Banco BPM has decided not to proceed with the deal involving MPS because “the conditions for reaching a mutually agreed deal between the parties have not been met”. The news came yesterday evening from the bank led by Giuseppe Castagna at the end of a turbulent day, which began early in the morning with a cold shower from across the Alps. “We have never received a proposal for a merger between MPS and Banco BPM,” said Olivier Gavalda, CEO of the largest shareholder, Crédit Agricole, during the presentation of results to analysts. As cool and terse as ever: “We have not received any proposal, nor any information regarding a potential merger, and consequently we are unable to say whether this proposal could create value for shareholders.” And what has become of French etiquette, the low profile and the proverbial discretion of the ‘Banque Verte’ at such a delicate moment? Such blunt comments immediately sounded like the requiem for the alternative to Intesa Sanpaolo’s takeover bid, which at this point has become the only option on the table. Chaos ensued at Montepaschi headquarters, where CEO Luigi Lovaglio continued to explore every possible option to resolve the impasse that had arisen regarding Plan B.

Finding himself pitted against the French bank, which was supposed to be an ally in this deal, came as a surprise to Lovaglio, but apparently not to Castagna, who was preparing for the evening board meeting to call a halt to the deal. “One of our preferred scenarios,” pointed out the head of Crédit Agricole, “would be a merger between Banco BPM and Crédit Agricole Italia, which would also allow us to strengthen our presence in Italy, where we really want to grow.” So, Crédit Agricole appears to have something very different in mind from a merger with another Italian bank. And it is saying so openly, seemingly unconcerned by the political sensitivities surrounding this issue. Why this sudden change of direction? It is plausible that the proposal of 7 June, in which BPM expressed its desire to merge with the Siena-based bank, was put forward with the approval of the largest shareholder – or at the very least that the latter was aware of it – and that discussions took place between BPM’s top management and Paris. So what happened? According to some financial sources, there are two possible explanations: the French are driving up the price, aware that in the event of a merger between BPM and MPS, their stake would be diluted to 10–15 per cent from the current 30 per cent. There have been rumours of a compensation package offered to the French in terms of assets and branches, and it may be that this was not enough to convince them. It could also be that this potential ‘exchange’ proved unfeasible due to issues of equal treatment amongst BPM’s shareholders – a principle which, by contrast, is respected in a public offer such as the one launched by Intesa Sanpaolo. Or there is another explanation, closer to what Il Foglio reported in recent days, namely that Crédit Agricole believes in the possibility of a takeover of Banco BPM by Unicredit and is preparing to reach an agreement with the group led by Andrea Orcel.

Gavalda was blunt: “Nothing gets done without us.” And indeed, given their significant stake, anyone making a move on BPM has to reckon with them. Certainly, Gavalda’s outburst will not have gone unnoticed at Palazzo Chigi, where Banco BPM’s ownership structure is being kept under close scrutiny. So far, the French have always done their utmost to reassure the government of their intentions in Italy: to grow their business but without getting involved in the power games of high finance and, above all, whilst respecting BPM’s identity and its Italian character. Some friction, however, had been noticeable in recent times, for example when Crédit reached the takeover bid threshold and the Ministry of Economy and Finance (MEF) expressed a certain degree of surprise. Since then, something must have frayed in the good relations between the French bank and the government, which were cemented last year when Crédit’s rise had served to block Unicredit’s path. It was a different world. In today’s scenario, a year ahead of the general election, the Meloni government appears concerned not to leave any trace of a banking consolidation – in which it played a part – that has resulted in an Italian bank changing hands to a foreign group. What is more, this is a bank with deep roots in northern Italy and one dear to the Lega. In the ‘reverse Risiko’ scenario of 2026 compared to 2025, it could be Unicredit – over which the government exercised its ‘golden power’ over BPM last year – that saves Italy’s banking sovereignty. If, of course, it decides to take action.