When Italian financial power broker Mediobanca helped its longtime client Monte dei Paschi di Siena structure a make-or-break capital raising in 2022, little did it know it would ultimately become a takeover target for the former poster child of the country’s failed banking system.
On Friday, MPS astonished investors by launching a €13.3bn all-share bid for its larger rival at a premium of just 5 per cent to Mediobanca’s closing price a day earlier.
The takeover offer by a lender that is still partially government-owned represents yet another shock to the Italian banking system, the latest in a series of back-to-back deal attempts that could reshape the country’s financial landscape.
“This is the final battle between Roman [politics] and Milanese finance,” said one government official.
Since taking power in late 2022, Giorgia Meloni’s rightwing government has made it a priority to portray itself as market friendly, seeking to ease observers’ fears it would use a heavy-handed nationalist approach to business and financial policy.
However, a series of interventions in the financial sector — including an attempt to engineer the sale of MPS to rival Banco BPM last year and controversial amendments to the country’s capital markets legislation — as well as public statements against “international speculators” have reignited such concerns.
“It is simply unfathomable that a commercial lender, whose [largest single shareholder] is the government, launches a takeover attempt of a larger investment banking rival, with a nil premium and without a clear strategic objective,” said one veteran banking executive in Milan.
Following the lender’s successful turnaround, Italy has been cutting its stake in MPS — which it bailed out in 2017 — to meet EU commitments to return the world oldest bank to private hands.
But the state remains the largest single shareholder with a stake of more than 11 per cent — and MPS appears to play an increasingly important part of government efforts to create a new centre of financial power.
Last year, Meloni’s government hoped to merge the Tuscan lender, once a symbol of Italy’s leftwing parties’ financial clout, with Banco BPM to create a large domestic banking hub.
Dubbed the “third pole”, the aim was for the enlarged lender to compete with larger rivals UniCredit and Intesa Sanpaolo and maintain a strong Italian footprint.
UniCredit’s takeover bid for Banco BPM in November thwarted those plans and left the government scrambling for ways to counter chief executive Andrea Orcel’s latest manoeuvre.
Insiders now say MPS’s move on Mediobanca shows Meloni’s government has abandoned hope that UniCredit can be stopped, and accepted that it must 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 have been thinking about since 2022”.
“We will create the third banking group in the country,” Lovaglio said. He called the move “brave”, “innovative” — and “friendly”. Insiders say that Mediobanca’s chief Alberto Nagel does not see it that way.
“Obviously the takeover bid is a market transaction”, Meloni told reporters on Saturday. “The only thing I note is that MPS, which used to be seen as a problem by both institutions and citizens, is a perfectly healthy bank that launches ambitious operations and this should make us proud.”
Replacing BPM with Mediobanca and turning MPS into buyer instead of target also gives Rome a fresh opportunity: to capitalise on connections forged with two giants of corporate Italy and extend its reach over the insurance group Generali — a large investor in Italian public debt, and one 13 per cent owned by Mediobanca.
In the latest auction of MPS shares in November, the government sold sizeable chunks of its remaining holding to Delfin, the holding company of the billionaire Del Vecchio family, the construction tycoon Francesco Gaetano Caltagirone and BPM.
Along with their new shareholdings in MPS, Caltagirone holds 7.8 per cent of Mediobanca and 6.9 per cent of Generali. Delfin has 9.9 per cent of Generali and 19.8 of Mediobanca.
Both Caltagirone and Delfin have long been at odds over strategy with Nagel and Generali chief Philippe Donnet, but have failed in bids to replace them.
Generali’s decision to enter an asset management joint venture with France’s Natixis, first reported by the Financial Times in November and announced on Tuesday, further aligned Rome with Caltagirone.
Meloni’s allies raised concerns over the risk Italian savings would be increasingly invested abroad and that the refinancing of Italy’s huge public debt might face hurdles going forward.
Such concerns resonated across the Italian establishment, and with Caltagirone. His representatives on the Generali board voted against the deal, according to people with knowledge of the deliberations.
Insiders see Caltagirone’s hand behind MPS’s move on Mediobanca, rather than MPS boss Lovaglio’s. In their telling, it is part of a broader attempt to take control of Generali and overhaul Mediobanca’s business and management, something the late billionaire Leonardo Del Vecchio set his eyes on years earlier. Caltagirone’s son Alessandro is a newly appointed member of MPS’s board of directors.
People close to Caltagirone and people close to MPS denied the Roman tycoon’s direct or indirect involvement in the transaction.
A merger between Mediobanca and MPS would help solve Caltagirone’s and Delfin’s long-standing complaints while also giving Rome a seat at the country’s most prestigious and influential financial tables.
There is no certainty that a deal will happen. MPS shares closed down 7 per cent on Friday, while Mediobanca’s shares rose almost 8 per cent.
Analysts’ responses were muted. Marco Nicolai at Jefferies noted that synergies between the two banks were limited and risks were high. “Cultural differences between the two companies could result in revenue dis-synergies, especially on the investment banking and wealth management front,” he added.
“Our first impression is that this offer has limited chances of success,” said KBW analyst Hugo Cruz.
But people close to MPS argued that Mediobanca “has stood still for too long”, and was overly reliant on its dividend from Generali, a long-standing criticism of the Milanese bank.
“The road ahead is long and winding, not just for MPS but for the whole Italian banking sector: lots of moving parts, lots of unknowns and too many actors involved,” said one chief executive.