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Italian capitalism has a hard-won reputation for being a hotbed of intrigue, in which rival factions strive to gain control of key assets without having to stump up much in the way of capital. The latest instalment — in which a small bank tries to take over a bigger one with the support of a crew of tycoons — will only help burnish that impression.
Monte dei Paschi di Siena’s all-share offer for Mediobanca looks underwhelming, viewed through the lens investors use to assess such deals. True, combining the €8bn Tuscan retail and commercial lender — the beneficiary of a bailout in 2017 — with a €13bn rival adept at investment banking and wealth management would create a diversified bank.
But there’s little scope for value creation. MPS has identified €400mn of cost cuts and funding benefits which, taxed and put on the bank’s multiple of 7.5 times, might create €2bn of value. On top of that, MPS has past tax losses it can offset more quickly against combined future earnings, for an extra €700mn-€800mn of net present value, Lex calculates. That adds up to 15 per cent of the market capitalisation of the two companies combined — well below the value usually created when banks with overlapping businesses merge.
Look at who is on the shareholder register, though, and the deal acquires a clearer logic. Certain names crop up on both sides. Italian tycoon Francesco Gaetano Caltagirone and Delfin, holding company of the Del Vecchio family, together own around 15 per cent of MPS and 25 per cent of Mediobanca. They also have a 17 per cent stake in insurer Generali, in which Mediobanca wields influence with 13 per cent of the shares.
Caltagirone and Delfin have long wished to gain control of the €46bn insurer. Their 2022 attempt to appoint a new management team at Generali was voted down by shareholders. Their move to oust Mediobanca’s management in 2023 was similarly unsuccessful. MPS’s bid for Mediobanca gives them a third tilt at the prize.
Despite the fact that the tycoons between them own a big chunk of Mediobanca shares, it is not clear that MPS’s offer will fly. The 5 per cent premium that it was launched at — tiny for a takeover — has already turned into a 7 per cent discount after Mediobanca’s 5 per cent share price bump and MPS’s 7 per cent decline on Friday morning. Attempts to sweeten the deal, too, may have limited runway. Thin industrial overlap caps the upside which MPS can offer to Mediobanca shareholders without sinking its own stock.
Still, the tycoons may benefit simply from setting the cat among the pigeons. Mediobanca will be under pressure to articulate its standalone value — and the continued existence of its shareholding in Generali. But for international investors hoping to reap value from Italian bank consolidation, this will rank as a disappointing evolution.
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