San Francisco Frontiers - Intesa roils Italian banking with rival bid for MPS

The offer kicks off a new round of consolidation in the country's banking sector, as firms look to bulk up for competing on a European scale.

MPS itself became Italy's third-largest bank just last year with the purchase of Mediobanca.

Intesa said its offer would create the second-largest bank in the eurozone by market value, behind Banco Santander, with a network of 3,000 branches.

Chief Executive Carlo Messina called it a "risk-free" move during a conference call with journalists, saying it "will strengthen our leading position in Italy, particularly in its wealthiest regions" such as Lombardy and Tuscany.

Intesa also plans to significantly boost its position in asset management for high net worth clients internationally through the Mediobanca network.

"The financial and banking sector, both at the Italian and European level, requires a consolidation process that creates large-scale projects capable of supporting the necessary investments," Intesa said in a statement.

Larger groups can "compete with new players and maintain adequate levels of profitability in an increasingly integrated market", it added.

- Declaration of love? -

Investors welcomed what could prove a bidding war for MPS, whose shares shot up nearly 13 percent in afternoon trading Monday.

Intesa shares were down two percent, while Banco BPM stock was up around one percent.

Analysts at the investment bank Equita welcomed the Intesa offer as "a logical move to further solidify Intesa's leadership in Italy, not only through the additional development of the banking channel, but also by becoming the leading consumer credit operator in Italy".

Intesa is offering 16 shares for every 10 MPS shares as well as one euro in cash per share, representing a 12.5 percent premium to MPS's closing share price Friday.

Messina said he did not intend to increase the offer, saying it gives MPS shareholders "a substantial bonus for a bank undergoing transformation, but with weaknesses".

A deal would bolster the combined group's net profit to over 16 billion euros by 2029, compared to 9.3 billion euros for Intesa last year.

Intesa has kept out of a wave of banking sector mergers and acquisitions in recent years, citing competition issues.

In an effort to win antitrust approval, Intesa said it had already struck a deal with the Italian insurer Unipol to sell it around half of MPS's branches and its central offices in Siena, it its bid is successful.

An extraordinary general meeting of Intesa shareholders is scheduled for September 10.

Banco BPM said Sunday that its tie-up with MPS would create a company worth "more than 50 billion euros" that would constitute "a new national champion".

But Messina dismissed BPM's offer as "more of a declaration of love than an offer".

"We have been working on this transaction for a long time," he said during the call. "By sending this letter, they probably wanted to get ahead of it."

Monte dei Paschi, the world's oldest bank still in operation, was bailed out by the Italian state in 2017 and reprivatised in 2023.

H.King--SFF