by Carlo Longo
The tone is set from the start: a company receiving an unsolicited offer, observes the London newspaper, can negotiate, resist, defend itself methodically — or do something completely crazy. According to Lex, MPS has chosen the latter path. After long advocating its stand-alone prospects, the world's oldest bank has made formal offers — accompanied by "inviting" presentations — to Banco BPM and Banca Generali, proposing the creation of the second-largest Italian banking group in terms of customer loans, with an aggregate capitalization of about 70 billion euros, not far from Barclays.
The FT acknowledges that, on paper, the operation has financial appeal: 1.2 billion in overlapping costs to cut, with a present value estimated at around 8.4 billion; considering a special dividend of 4 billion before the merger, the 50% stake in the new entity would be worth, according to the column's calculations, over 40 billion, 15% above the latest capitalization. The political context is also noted: the old Italian ambition of a "third pole" capable of competing with Intesa and UniCredit, the remaining 4.9% in the hands of the Treasury, past mergers blocked by Rome, and Giorgia Meloni's hope that MPS won't be dismantled.
But this is where the irony becomes sharp. "Aside from back-of-the-envelope numbers, the idea is at least extravagant," writes Lex — and from there lists the weaknesses.
First: the prices are stingy. Banco BPM — among whose shareholders is a skeptical Crédit Agricole — is offered a merger with no premium; Banca Generali is offered just a 10% increase over the pre-offer price. It's difficult, the FT implies, to convince anyone with such a proposal.
Second, and this is the central jab: it's not three banks, it's four. Having just acquired Mediobanca, MPS would actually be attempting a four-way merger. And here comes the phrase that gives the piece its title: merging two banks is already complicated and time-consuming; trying with four requires genuinely magical thinking.
Third: the defense is counterproductive. The FT concedes that MPS would have every reason to squeeze a few more billion from Intesa, which according to the column's calculations could raise the offer without destroying value. Until now, the Sienese approach had been measured, based on the contained premium and its own industrial plan. But this new "fantastical" defense risks producing the opposite effect: giving the impression that the board would do almost anything to avoid being acquired. With the result — concludes Lex — of making shareholders even more inclined to side with Intesa.
(Associated Medias) - All rights reserved