The world's oldest bank launches a €34 billion takeover of competitors

Italian Monte dei Paschi di Siena (MPS) has launched two parallel offers to acquire Banco BPM and Banca Generali with a total value of about €34 billion. If the plan is implemented, MPS could become the third-largest banking group in Italy.

MPS's board of directors has approved two separate share-exchange offers. For Banco BPM, the bank is offering about €25.3 billion, and it values Banca Generali at approximately €8.7 billion.

Both transactions will be settled mainly in MPS shares. Banco BPM shareholders are offered 1.567 new MPS shares for each of their shares, while owners of Banca Generali will receive 6.958 MPS shares per bank share.

If the plan is carried out, the combined group will control more than €810 billion in financial assets. Its total balance sheet could amount to approximately €466 billion.

The deal with Banco BPM will significantly strengthen MPS's presence in traditional banking. Together, the two networks will have about 2.65 thousand branches, making the group one of the largest in the country by physical presence.

Acquiring Banca Generali, in turn, is intended to strengthen MPS's positions in private wealth management. Combined with the already controlled Mediobanca, this will create one of Italy's largest platforms for managing the savings and assets of wealthy clients.

MPS expects the asset merger to generate about €2.6 billion in annual pre-tax synergies.

At the same time, the bank plans to return about €4 billion to its shareholders: €1 billion in cash and approximately €3 billion in shares of the insurance group Generali. After that, MPS will retain about 9% of Generali through Mediobanca.

The dual deal is also a response to a takeover attempt on MPS itself. In June, Intesa Sanpaolo made an unsolicited offer for MPS worth approximately €30.6 billion. MPS CEO Luigi Lovaglio has since sought an alternative scenario that would allow the bank to remain independent.

The plan's implementation is not yet guaranteed. Due to Intesa's current offer for MPS, the bank is subject to a so-called passivity rule, which restricts management from taking defensive measures without shareholder approval.

In addition, MPS will have to negotiate with major shareholders of the target banks. In particular, Crédit Agricole owns about 29% of Banco BPM, and Generali controls 51% of Banca Generali.

Based on materials from: Corriere della Sera, Financial Times