On Monday, UniCredit, an Italian banking institution, proposed a takeover bid for its domestic competitor Banco BPM. The offer is said to be independent of its ongoing chase for the German bank, Commerzbank. The acquisition, valued at approximately €10 billion ($10.5 billion), could potentially fuse two of Italy’s biggest lenders.
The proposed all-stock deal involves offering €6.657 per share, a slight uptick from Friday’s closing price of €6.644. UniCredit maintains that this purchase would buttress its position as a leading pan-European banking group.
However, the proposition did not sit well with the market, as UniCredit’s shares fell 1.7% in early trading on Monday. In contrast, Banco BPM’s shares enjoyed a 5% climb.
This announcement follows a series of merger and acquisition declarations in the European banking sector this year. Experts have long considered the industry ripe for consolidation, with UniCredit frequently mentioned as a potential buyer due to its robust cash position.
In September, UniCredit augmented its stake in Commerzbank to approximately 21% and sought permission to increase the holding to 29.9%. This followed an earlier acquisition of a 9% stake in Commerzbank, half of which was bought from the German government.
While the German government has not yet approved the potential merger, Chancellor Olaf Scholz has expressed his disapproval of hostile takeovers. The Berlin administration, Commerzbank’s largest shareholder, still holds a 12% stake after saving the bank during the 2008 financial crisis.
Meanwhile, earlier this month, Banco BPM itself made an offer for asset manager Anima in a potential deal worth €1.6 billion and subsequently acquired a 5% share of the state-owned Monte dei Paschi di Siena (MPS).
UniCredit reported an 8% YoY increase in quarterly net profit to €2.5 billion ($2.25 billion) on November 6, surpassing Reuters’ forecast of €2.27 billion. The bank also revised its full-year net profit guidance upwards to over €9 billion, from a previous estimate of €8.5 billion. This has resulted in a 55% increase in shares so far this year.
However, Kian Abouhossein, head of European bank equity research and global IB coverage at JP Morgan, believes that even if the Commerzbank and Banco BPM deals were staggered by nine months, this would still be an unrealistic timeline for the transactions.
He warned of regulatory scrutiny and execution risk due to the size of the bank, operational risk, and management’s ability to integrate two banks simultaneously. In his view, UniCredit CEO Andrea Orcel is likely hedging his bets with these transactions.
