Intesa kicks off consolidation
MILAN: Intesa Sanpaolo SpA kicked off on Monday long-awaited consolidation among Italian banks with a surprise €4.86 billion ($5.3 billion) takeover bid for smaller rival Unione di Banche Italiane SpA (UBI).
Italy’s top retail bank said it would offer 1.7 newly issued shares for every UBI share tendered to create a European-sized player focused on wealth management and insurance, with more than €1.1 trillion in customers’ financial assets.
“The banking sector is heading for consolidation in the coming years ... it is in Intesa’s interest to reach a size that will allow it to compete ... in Europe,” it said in a statement.
Intesa, which was the first among Italian lenders to bet on fees to drive revenues, said the deal would create the euro zone’s seventh-largest group by assets with an estimated combined profit of more than €6 billion in 2022.
If the offer is successful Intesa would quickly delist UBI and merge with it, aiming to complete the transaction by the end of the year.
To address potential antitrust concerns once the deal goes through, Intesa said it had signed on Monday a deal to sell 400-500 branches of the combined entity to BPER Banca SpA and, possibly, some of UBI’s insurance assets to UnipolSai Assicurazioni SpA.
BPER, Italy’s sixth-largest bank, said separately that it would launch an up to €1 billion capital increase to finance the purchase.
Intesa said it had picked UBI because it had a similar business model and operated mainly in Italy’s wealthier north, so as to minimise integration risks.
UBI had no immediate comment. A source close to Intesa said the move had not been previously agreed but was not hostile.
UBI is Italy’s fifth-largest bank and the strongest among second-tier lenders.
It had long been seen playing a prominent role in an expected wave of mergers among mid-sized Italian banks and was often tipped as a potential buyer of rival Banca Monte dei Paschi di Siena SpA which the state must reprivatise by the end of 2021.
Intesa said UBI, though well managed, lacked the necessary scale to shoulder the digital investments needed in the sector, which is grappling with negative interest rates and rising competition.
European banks have been unable to repay their cost of capital, hit by tougher rules after the global financial crisis and the European Central Bank’s ultra-loose monetary policy which makes lending unprofitable.
Bankers in the euro zone say they need to bulk up to compete with US rivals but diverging regulation across different countries hamper cross-border mergers.
“Size and the ability to compete both domestically and internationally are key ... to adequately reward capital,” Intesa said.
The exchange offer values UBI shares at €4.254 each, a 36% premium on the average stock price in the month through Friday. UBI shares closed up 5.5% on Monday at €3.491 each after the bank presented a new three-year plan.
Intesa said a €2 billion negative goodwill would fully cover integration costs estimated at €880 million after tax as well as €1.2 billion in planned net loan writedowns, needed to allow UBI to shed some €4 billion in impaired loans.
The deal is forecast to eventually generate €730 million in annual pretax synergies, mostly through cost cuts after 5,000 voluntary lay-offs, partly compensated by new hiring.