Siena, ITALY — Monte dei Paschi di Siena remains determined to pursue its acquisition of Mediobanca for 13 billion euros ($14.3 billion), despite prevailing market uncertainties. The bank communicated its intent to finalize this high-stakes deal by July to Finance Newso.
This historic institution, recognized as the world’s oldest operating bank, caught the attention of investors in January with an all-stock bid for Mediobanca, a highly regarded player in wealth management and investment banking. However, Mediobanca has dismissed the offer, characterizing it as “destructive” and lacking in financial justification.
The financial institution has endured several hurdles, particularly its government-led bailout in 2017 due to difficulties in securing essential capital from private sources. Since then, the Italian state has divested its majority shareholding, now holding less than 12% of the bank.
In remarks to Finance Newso on Monday, Monte dei Paschi’s CEO, Luigi Lovaglio, asserted that the bank is “back” and poised to take charge of its future.
Responding to concerns regarding whether current market volatility might hinder its expansion aspirations, Lovaglio declared, “The [market] situation will not impact our deal.” He emphasized that the turbulence actually reinforces the notion that scale is crucial, suggesting that a merged entity would be “stronger” and more agile in responding to market demands.
While some firms have chosen to delay transactions amidst ongoing market fluctuations, such as British private equity firm 3i Group’s reported postponement of a sale involving pet food producer MPM, and fintech company Klarna’s decision to hold off on its IPO plans, Monte dei Paschi remains resolute.
Analysts find themselves split on the merits of the Monte dei Paschi-Mediobanca proposal. For instance, Deutsche Bank noted in mid-March that the market may be overlooking opportunities available to Monte dei Paschi, including an expanded distribution strategy.
Conversely, some analysts have raised concerns about the limited potential for synergy when merging two distinct banking entities. Barclays, in its assessment on Monday, adjusted its price target for Monte dei Paschi, adopting a more skeptical stance regarding the anticipated advantages from a merger with Mediobanca. The firm cautioned that if Monte dei Paschi sought to increase its offer to appeal to Mediobanca’s institutional shareholders, it could lead to a depletion of excess capital.
When queried by Finance Newso, Lovaglio stood firm on the belief that the acquisition offer for Mediobanca represents a “fair price,” opting not to disclose whether adjustments to the offer would be made to garner more support from Mediobanca’s stakeholders.
“Hopefully within July, we can complete the deal,” he remarked.
On a day marked by a downturn in global equity markets, shares of both Monte dei Paschi and Mediobanca fell by approximately 5%. Since the announcement of the acquisition on January 24, Mediobanca’s stock has depreciated by around 14%, while Monte dei Paschi has seen a decline of about 8.5%.
Larger Ambitions
Monte dei Paschi’s bid for Mediobanca has surfaced amid a broader wave of consolidation in the Italian banking landscape, evidenced by UniCredit’s recent proposal to acquire rival Banco BPM for approximately 10 billion euros.
Lovaglio described these transactions as part of an initial phase of consolidation among domestic banks. He anticipates a subsequent phase in two years. “By merging Monte [dei] Paschi with Mediobanca, we will position ourselves as key players once more,” he stated.
