Il Monte is trying to grow big so it won’t be bought out

Thirty-four billion to avoid being taken over. Following a seven-hour board meeting in Siena, MPS approved two voluntary and parallel public exchange offers, both settled entirely in its own shares: 25.35 billion for Banco BPM and 8.72 billion for Banca Generali. Nine votes were in favour, including that of Corrado Passera, whilst the four minority directors abstained; they have been complaining for months that they are being excluded from strategic decisions.

The mechanism is simple. Anyone tendering one Banco BPM share will receive 1.567 MPS shares, with no premium. Anyone tendering one Banca Generali share will receive 6.958 shares, with a 10 per cent premium on the prices of 19 August. No cash outlay: Siena pays by issuing shares. Assuming full participation, and taking into account the merger of Mediobanca into Monte dei Paschi that has already taken place, the current MPS shareholders would retain a 50.1 per cent stake in the combined group, those of Banco BPM 37.2 per cent, and those of Banca Generali 12.7 per cent.

It is a defensive move. On 8 June, Intesa Sanpaolo launched a 30.6 billion takeover bid for MPS – 1.6 of its own shares plus one euro for each MPS share – with the aim of acquiring Mediobanca, its stake in Generali and half of the Siena-based network, whilst transferring the other half to Unipol. Luigi Lovaglio’s counter-move consists of inflating the value of the target: Monte dei Paschi – with assets of 466 billion, total assets of 810 billion, over 2,600 branches, and Italy’s third-largest banking group – becomes a far more costly and politically sensitive acquisition. Synergies are estimated at 2.6 billion annually before tax, with one-off costs of 2.5 billion between 2027 and 2029, and a cost-to-income ratio of 36 per cent compared with the current 46 per cent.

Then there is the money needed to persuade its shareholders to stay on board. MPS is proposing an extraordinary dividend of 4 billion, amounting to 1.208 euros per share: 0.302 in cash and 0.906 in Assicurazioni Generali shares, representing approximately 4.5 per cent of Assicurazioni Generali’s share capital. This is 1 billion more than the cash component offered by Intesa, with the addition of a stake that brings Siena and Trieste back to the same table: MPS explicitly refers to this as a “first step” towards an industrial partnership with the Generali Group.

Obstacles remain, and there are many. The passivity rule stipulates that defensive measures must be approved by the general meeting, scheduled for 29 October: a two-thirds majority is required, in a shareholder base where Delfin and Caltagirone have already taken opposing stances on the board renewal in April. The offers are conditional upon a minimum acceptance rate of 50 per cent plus one share and on regulatory approvals, with completion expected by mid-February 2027. Finally, Banco BPM is under pressure from Crédit Agricole, the largest shareholder with a 29.3 per cent stake, whose reluctance had already scuppered the merger on equal terms proposed on 7 June: the French bank can remain in the new group with a stake of over 10 per cent or opt to be paid out in branches and assets.

Banco Bpm and Banca Generali have remained silent, with the latter’s board meeting today. Intesa has also remained silent, having so far expressed confidence in the merits of its bid. On the political front, Lovaglio has secured the backing of Giorgia Meloni and the PD, as well as bipartisan support from Sienese and Tuscan institutions. The market, for now, is watching: on the eve of the announcement, MPS fell by 0.3 per cent, Banco BPM rose by 0.7 per cent and Banca Generali by 1.3 per cent. Only Unipol performed poorly, down 3 per cent.