How Italy’s MPS went from close to collapse to bid for revered service provider financial institution

By Valentina Za, Gianluca Semeraro and Mathieu Rosemain

MILAN (Reuters) -Monte dei Paschi (MPS) CEO Luigi Lovaglio has pulled a number of 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 financial institution, 5 years after bailing it out.

Again in October 2022 he labored by the evening to tug off a share sale, as MPS’s seventh money name in 14 years sparked last-minute panic amongst banks underwriting it. MPS struggled to promote shares at 2 euros every again then.

MPS inventory traded at 7 euros this week when Lovaglio and his finance chief Andrea Maffezzoni have emerged from two all-nighters that led to them launching a 13.3 billion euro ($14 billion) all-share takeover bid for bigger rival Mediobanca (OTC:MDIBY), Italy’s historic funding financial institution.

Greater than 10 billion euros in money between 2017 and 2022 have allowed MPS to scrub up its steadiness sheet in time for the financial institution to grab the revenue increase from greater charges and leap on the consolidation practice racing by the Italian sector.

MPS, which as soon as threatened to unfold contagion throughout the trade, is bidding for a financial institution that for many years held sway over Italy’s monetary enviornment.

Lovaglio, 69, appeared aware of his daring transfer and sought to strike a conciliatory tone on Friday.

“We do not wish to take any motion that may not directly make weaker the highly effective organisation that Mediobanca is,” he informed analysts.

THE ODD COUPLE

Analysts fretted “the odd couple” of Mediobanca and MPS had in frequent little greater than two vital shareholders: Delfin, the holding firm of late billionaire Leonardo Del Vecchio, and fellow tycoon Francesco Gaetano Caltagirone. 

Worldwide funds have piled into MPS over the previous two years because the Treasury reduce its stake to 11.7% from 68%. The shock bid sparked a sell-off, with MPS shares closing down 7%.

An individual concerned within the deal mentioned advisers UBS and JPMorgan would set to work to clarify the deal to traders and dispel considerations it might simply replicate the shareholders’ secret agenda.

Delfin and Caltagirone additionally personal stakes in Italian insurer Generali (BIT:GASI), and have for years accused Mediobanca CEO Alberto Nagel of relying excessively on revenue from Mediobanca’s stake in Generali.

Delfin and Caltagirone this week opposed Generali’s asset administration tie-up with France’s Natixis Funding Managers. 

They discovered an ally within the authorities, which is worried about financial savings shifting outdoors of Italy.

On the similar time, the federal government’s resolve to assist construct a 3rd huge banking group in Italy to rival Intesa Sanpaolo (OTC:ISNPY) and UniCredit strengthened. 

Rome had thought it was headed in the precise route when in November it bought shares in MPS to Banco BPM, Italy’s third largest lender, in addition to Delfin and Caltagirone. 

However late final yr, UniCredit made a shock bid for Banco BPM, thwarting Treasury’s efforts to encourage, with assist from Delfin and Caltagirone, a tie-up between MPS and BPM.

SACRED

Lovaglio on Friday mentioned he had offered Mediobanca as a merger choice for MPS to Italy’s financial system minister again in December 2022, alongside plans for extra plain-vanilla tie-ups with friends.

Since then, it had develop into broadly identified that mid-sized rivals Banco BPM and BPER had been potential candidates for MPS.

Solely the current emergence of Delfin and Caltagirone as main MPS traders put Mediobanca on the map of potential offers.

An individual concerned within the bid’s preparation mentioned that Mediobanca was “such a sacred title” in Italian finance that it was pure to maintain any tie-up ambitions secret till they may have an opportunity of success.

Rome on Friday threw its assist behind MPS’s bid for Mediobanca, with two folks near the matter saying the Natixis-Generali mixture could have performed a task in cementing the federal government’s assist for the plan.

A 3rd individual concerned within the bid, nevertheless, mentioned Lovaglio’s causes for the deal had been purely industrial and primarily based on the necessity to discover MPS a accomplice and the way complementary the 2 companies could possibly be.    

“We’re in addition to ourselves,” a senior MPS worker at a Siena department informed Reuters on situation of anonymity. “This deal could be so excellent for our franchise.” 

Up to now, nevertheless, Mediobanca CEO Nagel has rebuffed makes an attempt to open a dialogue with MPS and is getting ready to struggle towards the supply, two folks with information of the matter mentioned. 

Mediobanca has not commented on the bid.

($1 = 0.9541 euros)