Pedestrians walk outside the Banca Monte dei Pasi di Siena Spa Bank Branch in Milan, Italy.
Alessia Pierdomenico | Getty Images
Siena, Italy – Monte dei Pasi di Siena has firmly held plans to acquire Mediobanca for 13 billion euros ($14.3 billion), telling CNBC that it will close the deal in July despite ongoing market turbulence.
The oldest bank in the world is still in operation, surprised investors in January when they made an all-selling institution to Mediobanca, a well-known institution focusing on asset management and investment banking. Mediobanca rejected the proposal and denounced it as a “destroying” move without financial grounds.
Monte dei Pasci has faced several challenges over the years. Most notably, when it was bailed out by the Italian government in 2017, especially because it failed to raise much needed cash from private investors. The Italian government has sold a majority stake in Monte Dei Paschi, currently representing less than 12% of its ownership.
Bank CEO Luigi Lovaglio told CNBC on Monday that Monte Dei Paschi is “back” and “control our destiny.”
When asked whether ongoing market turbulence could become an issue with expansion planning, Lovaglio said. [market] The situation has no effect on our transactions. ”
“On the contrary, [the market situation] We confirm that size is important, [it] We are making sure we need to diversify our revenues,” he said, adding that if they are already combined entities, they have the ability to “respond more strongly” and “respond more quickly.”
Recent market volatility has led some companies to put on hold on some transactions. British Private Equity Firm 3i Group Plc reportedly postponed the sale of the manufacturer of pet food MPM, but fintech company Klarna has put an IPO plan on hold.
Analysts are divided into the benefits of trading between Monte Dei Paschi and Mediobanca. For example, Deutsche Bank said in mid-March that the market was ignoring potential opportunities for Monte dei Pasi, including a larger distribution policy.
Other analysts warned of limited synergies when combining two different banks. Barclays, for example, said Monday it lowered its price target for Monte dei Pasci and is more skeptical of potential profits from dealing with Mediobanca. “If Monte dei Pasci decides to spend more to convince the majority of Mediobanca’s institutional shareholders, excess capital could decrease,” Barclays said.
Speaking to CNBC, Lovaglio gave up on Mediobanca’s offer, offered a “fair price” and did not comment on whether the company would sweeten the contract to make it more attractive to Mediobanca’s shareholders.
“Hopefully we can close the transaction within July,” he added.
In a pullback in the global equity market on Monday, Monte dei Paschi and Mediobanca both share a closure about 5% lower. Since Monte Dei Paschi announced his intention to buy Mediobanca on January 24th, the latter stock has lost around 14% of its value, while the former has lost around 8.5%.
Greater Ambition
Monte Dei Paschi’s offer to Mediobanca has come at a time for a broader integration effort in Italian banking. Last year, UnicRedit announced an offer to buy rival Banco BPM for around 10 billion euros.
Lovaglio said these bids represent the first wave of domestic integration of Italian banks.
“I think this is the first phase. [of consolidation] And then there will probably be a second phase two years later. Therefore, by combining Monte [dei] Paschi from Mediobanca, we will be in a position to become the main character again,” Lovaglio said.
