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Monte dei Paschi explores Banco BPM takeover after ‘merger of equals’ talks collapse

MPS chief executive weighs approach to Banco BPM’s largest shareholder, Crédit Agricole

People stand inside a Monte dei Paschi di Siena bank branch in Rome, visible through glass doors.MPS, which reports its first-half results this week, said in February that it had sufficient excess capital to pursue acquisitions© Reuters

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Monte dei Paschi di Siena is exploring alternative options to fend off Intesa Sanpaolo’s hostile takeover, including a potential takeover of Banco BPM, after talks over a “merger of equals” between the smaller lenders collapsed on Friday.

According to people familiar with the matter, one of the options being examined by MPS chief executive Luigi Lovaglio instead is an acquisition of Banco BPM, a deal he has long championed.

Lovaglio was considering approaching Banco BPM’s largest shareholder, Crédit Agricole, the people said, although no contact had been made over the weekend and no takeover would proceed if the French bank’s management declined to engage, according to the people.

On Friday, Crédit Agricole’s chief executive Olivier Gavalda said the bank would “analyse any solid project with respect to its strategic interest, execution risk and capacity to create value over the long term for all of Banco BPM’s shareholders”.

But he added that “at this stage, it is very difficult to see how a combination between MPS and Banco BPM can be value accretive for Banco BPM shareholders”.

If MPS did seek to acquire Banco BPM, the potential deal could be structured as an agreed share-based merger negotiated directly with Crédit Agricole, under which MPS and Banco BPM would settle an exchange ratio and the French bank would roll its near-30 per cent stake into the enlarged group, one person said.

Such a structure could limit the cash required and make the transaction easier to execute, but would depend on agreements over governance, board representation, commercial partnerships and Crédit Agricole’s eventual stake, they said.

MPS, which reports its first-half results this week, said in February that it had sufficient excess capital to pursue acquisitions.

The potential move by Lovaglio is the latest twist in a nearly two-month saga that began when Banco BPM approached MPS proposing talks over a merger of equals. The following day, Intesa launched a €30.6bn bid for the Tuscan lender, gazumping BPM’s expression of interest.

Last month, Crédit Agricole raised its stake in Banco BPM to 29.3 per cent. It was Gavalda’s statement on Friday that the French lender had received no information about a potential merger between Banco BPM and MPS, while his deputy insisted that Crédit Agricole’s shareholding made it a necessary party, that prompted Banco BPM to abandon the preliminary discussions with MPS.

In the wake of those comments on Friday, MPS said it “remained focused on implementing its growth plan and integrating Mediobanca, and will continue to assess all strategic options in the interests of all stakeholders”.

Crédit Agricole has signalled that it would welcome a tie-up between Banco BPM and Crédit Agricole Italia.

Lovaglio faces an uphill battle with MPS’s board deeply divided over his strategy. Four directors criticised his approach to dealmaking in a letter last week, while top shareholder Francesco Gaetano Caltagirone openly opposed a tie-up with Banco BPM in an interview with Italian media.

Because MPS is subject to Italy’s so-called passivity rule while Intesa’s offer is pending, any competing transaction would require approval from shareholders at an extraordinary meeting before the chief executive could proceed.

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