UniCredit launches takeover bid for rival BPM for $10 billion
25 NOV, 2024
By Jose Luis Palmer from RankiaPro Europe
Italian bank UniCredit announced a proposal to acquire its domestic rival Banco BPM in an all-stock deal valued at approximately €10.1 billion ($10.57 billion). The offer involves exchanging 0.175 of UniCredit's shares for each Banco BPM share, valuing BPM shares at €6.67 each, which represents a slight premium over the recent closing price.
Strategic Goals and Market Impact
The acquisition aims to merge Italy’s second and third-largest banks, enhancing UniCredit’s position in the domestic market and potentially making it Italy's largest lender by assets. UniCredit CEO Andrea Orcel stated that the merger would create significant long-term value for shareholders and strengthen the bank's competitive position in Europe. The deal is expected to be completed by June 2025, with full integration within the following year.
The transaction is subject to regulatory approvals, including from the European Central Bank (ECB). UniCredit also emphasized that this move is independent of its investment in Commerzbank, a German bank where it has been increasing its stake amid political opposition in Germany.
This acquisition reflects a broader trend of consolidation in the European banking sector as institutions seek to enhance their scale and competitiveness against other global economic blocs.
Markets reaction
- Filippo Maria Alloatti, Chief Financial Officer for Credit, Federated Hermes Limited
In a surprising turn of events, UniCredit has announced a voluntary public exchange offer for Banco BPM, valued at approximately €10.1 billion in an all-share transaction. This move by UniCredit's management underlines its strategic agility and its commitment to strengthen its market position in Italy. The transaction is expected to be completed in June 2025, and UniCredit has assured that its dividend policy for 2024 will remain unchanged.
his acquisition will have a limited impact on UniCredit's capital buffers due to the all-share structure, but there are potential concerns about concentration risk and spreads. I would expect the acquisition to have a positive impact on BPM Bank's credit spreads, although the issue premium is modest.
On the other hand, Commerzbank could see negative implications, with a lower probability now or longer term. Today's announcement also puts the combination of Monte dei Paschi and Banco BPM at risk, as Banco BPM and Anima Holding already own a 9% stake in Monte dei Paschi.
- Marco Troiano, Head of Financial Institutions Ratings at Scope Ratings
So far this year there has already been a spike in announcements of mergers and acquisitions of large banks, heralding a possible consolidation phase in the sector. UniCredit's bid for BPM Bank underlines our long-held view that there is more potential for domestic consolidation in Italy, Spain, Germany and the UK than for cross-border activity.
UniCredit's bid for BPM follows DNB's bid for Carnegie (a Nordic regional operation), BBVA's bid for Sabadell and a series of domestic bank mergers and acquisitions in the UK. Although UniCredit's recent takeover of Commerzbank is officially an international deal, we do not consider it a classic international deal, as UniCredit already has a significant business in Germany through HVB.
We believe that domestic mergers and acquisitions have greater potential for value creation, due to cost synergies in physical distribution and overlapping centralised functions. In contrast, the case for cross-border mega-mergers remains weak. The economics are complicated, cost synergies are more limited due to the lack of overlapping distribution networks, the potential for regulatory ring-fencing limits financing cost synergies, and execution risk is higher.
Beyond purely banking M&A, the recent bid by BPM Bank for the remainder of Anima, Italy's largest independent asset manager, is a paradigmatic example of the benefits of the so-called Danish Compromise. This is a Basel 3 agreement enshrined by the EU in CRR3, which has paved the way for the creation of financial conglomerates.
BNP Paribas was the first bank to make use of this capital-efficient arrangement with its acquisition of AXA Investment Managers. BPM's bid for Anima to create Italy's second largest bancassurance group, behind Intesa, is consistent with its strategic plan to leverage the turnover generated by its product factories.
We believe the Anima transaction is positive for BPM as it will result in a more diversified business profile and potentially reduce earnings volatility. From a commercial point of view, it will broaden BPM's product offering and provide it with greater economies of scale that could translate into revenue synergies.
BPM's purchase of 5% of BMPS in the recent accelerated government capital increase (together with Anima's acquisition of 3%), cemented BPM's intention to secure a long-term partnership with MPS (the largest distributor of Anima's products). At the same time, the transaction positioned BPM as a strong candidate for a full acquisition of MPS.
Speculation about bank mergers and acquisitions has increased as European governments have become increasingly active in exiting the stakes in banks they acquired at the time of the global financial crisis. Beyond the fact that European banks are in better shape from a capital standpoint, the exit of governments has helped bolster confidence in the sector, which is now seen as capable of operating independently. Government divestitures allow potential acquirers to enter into strategic transactions free from government influence. Government involvement is likely to have discouraged mergers and acquisitions.
