how Mediobanca turned prey for Monte dei Paschi

When Italian financial power broker Mediobanca helped its longtime client Monte dei Paschi di Siena raise a make-or-break capital in 2022, few knew it would eventually become a takeover target for the former poster child of the country’s failing banking system.

On Friday, MPS surprised investors by launching a €13.3 billion all-share bid at a premium of just 5 percent to its larger rival. MediabankaIts closing price was a day earlier.

The takeover offer by a lender still partially state-owned represents another blow to the Italian banking system, which could reshape the country’s financial landscape.

“This is the final battle between the Romans [politics] and Milanese finance,” said a government official.

Since taking power in late 2022, Georgia Meloni’s right-wing government has made it a priority to portray itself as market-friendly, allaying observers’ fears it will use a heavy-handed nationalist approach to business and fiscal policy.

However, a series of interventions in the financial sector — including attempts to engineer its sales MPS Banco BPM’s rival last year and controversial amendments to the country’s capital markets law — as well as public statements against “international speculators” — have renewed such concerns.

“It is a commercial lender, whose [largest single shareholder] The government, has launched a takeover attempt at a larger investment banking rival with a zero premium and without a clear strategic objective,” said a veteran banking executive in Milan.

After a successful turnaround of lenders, Italy is cutting its stake in MPS — which bailed out in 2017 — to meet EU commitments to return the world’s oldest bank to private hands.

But the state remains the largest single shareholder with a stake of more than 11 percent — and MPS appears to be playing an increasingly important role in the government’s efforts to create a new center of financial power.

Last year, Meloni’s government hoped to merge the Tuscan lender, a symbol of the financial influence of Italy’s leftist parties, with Banco BPM to create a large domestic banking hub.

Dubbed the “Third Pole”, the aim was for the larger lenders to compete with larger rivals UniCredit and Intesa Sanpaolo and maintain a strong Italian footprint.

UniCredit’s takeover bid for Banco BPM in November scuppered those plans and left the government scrambling for ways to deal with chief executive Andrea Orcel’s latest strategy.

Insiders now say MPS’s move on Mediobanka shows Meloni’s government has given up hope that UniCredit can be closed, and has acknowledged it needs to find an alternative to BPM for its consolidation efforts.

On Friday, MPS chief executive Luigi Lovaglio said the takeover offer was “an industrial project we are thinking about from 2022”.

“We will create the third banking group in the country,” Lovaglio said. He called the move “bold”, “innovative” – ​​and “friendly”. Insiders say that Alberto Nagel, head of Mediobanka, doesn’t see it that way.

“Obviously a takeover bid is a market transaction,” Meloni told reporters on Saturday. “The only thing I notice is that MPS, which was seen as a problem by both institutions and citizens, is a completely healthy bank that launches ambitious activities and that should make us proud.”

Replacing BPM with Mediobanca and making MPS a buyer rather than a target also gives Rome a new opportunity: to capitalize on forged connections with the two giants of corporate Italy and to expand its reach over insurance group Generali – a major investor in Italian public debt, and a 13 percent Owned by Mediobanca.

In the latest auction of MPS shares in November, the government sold a significant portion of its remaining holdings to Delfin, the holding company of the billionaire Del Vecchio family, construction tycoon Francesco Gaetano Caltagirone and BPM.

In addition to their new shareholding in MPS, Caltagirone owns 7.8 percent of Mediobanker and 6.9 percent of Generali. Delfin owns 9.9 percent of Generali and 19.8 percent of Mediobanker.

Both Caltagirone and Delfin have long been at odds over strategy with Nagel and Generali chief Philippe Donnett, but failed to bid to replace them.

Generali’s decision to enter into an asset management joint venture with France’s Natixis, first reported by the Financial Times in November and announced on Tuesday, further ties Rome to Caltagirone.

Meloni’s allies have expressed concern that Italian savings at risk will increasingly be invested abroad and that the refinancing of Italy’s massive public debt could face obstacles going forward.

Such concerns resonate across Italian institutions and with Caltagirone. Its representatives on the Generali board voted against the deal, according to people with knowledge of the negotiations.

Insiders see Caltagirone behind MPS’ move to Mediobanca rather than MPS boss Lovaglio. According to them, this is part of a larger effort to take control of Generali and restructure the business and management of Mediobanka, which the late billionaire Leonardo Del Vecchio had focused on a few years ago. Caltagirone’s son Alessandro is a newly appointed member of MPS’s board of directors.

People close to Caltagirone and those close to MPS have denied direct or indirect involvement of the Roman tycoon in the transaction.

A merger between Mediobanca and MPS would help resolve Caltagirone and Delfin’s long-standing grievances and give Rome a seat at the country’s most prestigious and influential financial table.

There is no guarantee that an agreement will be reached. MPS shares fell 7 percent on Friday, while Mediobanker shares rose nearly 8 percent.

The reaction from analysts was muted. Marco Nicolai at Jefferies noted that synergies between the two banks were limited and risks were high. “Cultural differences between the two companies, particularly on the investment banking and wealth management fronts, may lead to revenue conflicts,” he added.

“Our first impression is that this offer has a limited chance of success,” said KBW analyst Hugo Cruz.

But people close to MPS argued that Mediobanca had been “standing around for too long”, and was over-reliant on its dividends from Generali, a long-standing critic of the Milanese bank.

“The road ahead is long and winding, not just for MPS, but for the entire Italian banking sector: lots of moving parts, lots of unknowns and lots of actors involved,” said one chief executive.