Italy bank showdown looms in test for European consolidation

MILAN: As many bankers fled Italy’s financial capital for second homes in the mountains or lakes at the start of a coronavirus lockdown in March, Victor Massiah rushed instead to rent a house within walking distance of UBI Banca’s Milan offices.

And that is where the 61-year-old CEO has since spent most of his waking hours, battling not only to pull the bank through a pandemic that devastated its core areas in Italy’s industrial north, but also to see off a takeover he opposes.

Intesa Sanpaolo CEO Carlo Messina sprang the bid on UBI days before the coronavirus outbreak, seeking a deal he hopes will hasten a wave of European consolidation that the European Central Bank has been calling for. And what would be the biggest bank takeover in Europe for more than a decade is now approaching a finale, with Intesa’s offer to UBI shareholders set to run from July 6 to July 28.

The bid needs the approval of at least 50% of UBI investors plus one share to be valid, a control threshold which the ECB cleared earlier this month.

But while markets have priced in the deal going ahead, Massiah is firmly against UBI being a takeover target and he is banking on small investors, whose choice will be critical. Instead he wants UBI, which was itself formed by a merger of local banks in 2007, to instigate any deal-making.

Following aborted efforts in recent years to negotiate deals involving rivals Banco BPM and Monte dei Paschi , only weeks before Intesa’s incursion, Massiah had tried but failed to clinch a merger with smaller peer BPER Banca , a person involved in the talks said. Since Messina informed him of the offer with a late-night call in mid-february, Massiah has been working with Credit Suisse and Goldman Sachs on an alternative plan, with the backing of local shareholders, many of which are long-standing small business customers of UBI and say the bid undervalues their bank.

UBI investor Domenico Bosatelli, owner of Bergamo-based electric components maker Gewiss, has said that while the offer makes sense for Intesa and strengthens its competitiveness, it does not for UBI, as its “mission would disappear”.

While institutional investors holding 40-50% of UBI shares are largely expected to back the deal, attracted by the prospect of bigger dividends, it is the bank’s core investors that will decide whether Intesa secures more than its minimum goal.

Sources close to UBI say its retail customers, who account for 15-20% of its share capital, may decide to hold onto stock which has been handed down over generations.

This is despite many analysts saying it would make little sense for UBI investors to shun Intesa’s bid, which was at a 24% premium to UBI’S share price on the day it was announced.

Although the premium has since evaporated, analysts say UBI shares would likely tank if the bid fell through.

Local dynasties like the Bombassei family, owner of Bergamo-based brake maker Brembo, or the Beretta family of gunmakers belong, like Bosatelli, to the CAR shareholder pact which holds 19% of UBI and calls Intesa’s bid “unacceptable”.

A smaller group with 1.6% of UBI shares also opposes the offer, while a bigger one holding 7.7% has not expressed a view.

Prevented by takeover rules from mounting an active defence, UBI has sought to challenge Intesa in court and with regulators, saying it is solely interested in taking out a competitor. Despite its ties with a chronically stagnant economy, Italy’s second largest bank boasts one of the highest payouts in Europe thanks to lean costs, a focus on fees earned through wealth management and insurance and deals such as the recent sale of its retailers’ payments business.