Mediobanca rejected a €7bn takeover bid from MPS, calling it “damaging of worth” and warning it will weaken its enterprise mannequin.
Mediobanca rejected a €7 billion takeover bid from Banca Monte dei Paschi di Siena (MPS), dismissing the provide as “strongly damaging of worth” and setting the stage for one of the crucial dramatic banking battles Italy has seen in years.
In a press launch on Tuesday, the Milan-based funding financial institution, recognized for its high-margin companies in wealth administration and funding banking, warned that merging with MPS would erode shareholder worth, drive away prime purchasers, and weaken its unbiased advisory mannequin.
“The Board of Administrators of Mediobanca finds that the Supply is devoid of business and monetary rationale and is due to this fact damaging for Mediobanca,” Mediobanca acknowledged.
For MPS, the world’s oldest financial institution, the deal represented a possibility to create a bigger, extra aggressive banking group, one it claims might unlock €700 million in annual value synergies.
However for Mediobanca, which has spent years carving out a definite position in Italy’s monetary system, the provide appears extra like a risk than a possibility.
The message from Mediobanca’s board was clear: this deal is essentially flawed.
MPS’s preliminary takeover proposal for Mediobanca provided 23 MPS shares for each 10 Mediobanca shares, valuing Mediobanca inventory at €15.99 per share, a 5% premium to its 23 January closing value.
Two banks, two visions
On the coronary heart of the dispute is a elementary distinction in technique.
Mediobanca has spent years transferring away from conventional lending, focusing as an alternative on funding banking and wealth administration, companies that generate steady, high-margin revenues.
It has positioned itself as a trusted, unbiased monetary adviser—a picture it believes can be compromised below MPS’s conventional retail and SME banking mannequin.
MPS, then again, continues to be making an attempt to shake off the challenges of the previous decade.
Having undergone a €2.5 billion state bailout in 2017, the Siena-based financial institution stays closely reliant on retail banking, an space Mediobanca sees as much less worthwhile and extra uncovered to financial downturns.
Final Friday, the world’s oldest financial institution and a recipient of a authorities bailout, made an surprising transfer on Friday by launching an all-share takeover bid for Mediobanca (MB). The proposal provides 23 MPS shares for each 10 Mediobanca shares, successfully valuing Mediobanca’s inventory at €15.99 per share—a 5% premium to its closing value on 23 January.
For Mediobanca, the dangers of a merger outweigh any potential advantages.
Based on the Milan-based establishment, there are not any actual value synergies in a cope with MPS as the 2 banks have very totally different distribution networks, which means there’s little alternative to chop prices.
Moreover, Mediobanca claimed that its independence can be compromised. Mediobanca’s funding banking and advisory companies depend on conflict-free relationships with company purchasers, one thing that may very well be disrupted below MPS’s business banking mannequin.
Maybe most tellingly, Mediobanca identified that MPS’s provide implies a reduction of three% to its pre-announcement inventory value—a uncommon dynamic in takeovers, the place bidders sometimes provide a premium to win over shareholders.
Markets reactions
Since information of the bid emerged final week, MPS shares have dropped practically 10%, reflecting considerations that the financial institution might lack the monetary power to execute such an bold takeover.
Mediobanca shares had initially jumped 8%, although they later slipped 3.5% on Tuesday because the deal collapsed.