SIENA. Siena is certainly no stranger to great duels. A tradition several centuries old. Fortunately, in today’s battles, which take place in Piazza Affari, diplomacy replaces cannons and legal documents become trench weapons. Luigi Lovaglio, helmsman of Monte dei Paschi, has decided that he will not be the sacrificial victim of Carlo Messina.
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Thus, while the 30.6 billion takeover bid launched by Intesa Sanpaolo in June looms over the towers of Siena, the banker originally from Potenza has played his ace: a double public exchange offer (Ops) worth 34 billion euros to buy Banco Bpm and Banca Generali in one fell swoop. A defensive move that aims to present itself as the design of a new national credit champion.
The financial architecture is monumental. Lovaglio puts on the table 25.3 billion euros for Banco Bpm and 8.7 billion for Banca Generali. Two parallel but autonomous operations, which Siena intends to give rise to a pro-forma giant with 466 billion in assets, 80 billion in capitalization, and over 810 billion in managed assets. To convince Mps shareholders to follow him into this promised land, the CEO dangles the sweetest carrot: an extraordinary dividend of 4 billion euros, to be paid 1 billion in cash and 3 billion in Generali shares. In the conference call with analysts, Lovaglio confidently states: “We create value for shareholders, workers, and the entire community; Monte is a natural partner for non-hostile mergers.”
The market, however, looked at the plan with raised eyebrows, convinced that the supermanager is bluffing or, at least, has miscalculated. At Piazza Affari, the reaction was a chorus of yawns and sales. The Mps stock fell by 1.3% (with prices still clinging to the 12.5% premium embedded in Messina’s offer), a clear sign that strong hands are still betting on Intesa Sanpaolo’s success. Banca Generali lost 2%, effectively snubbing an exchange based on a stock — the Sienese one — considered too volatile. Banco Bpm limited the damage to -0.4%, remaining on the sidelines waiting to see if the game will become even more crowded. Meanwhile, Generali stands at a modest +0.3% and Intesa Sanpaolo slips slightly (-0.7%), not at all shaken by the Tuscan counterattack.
The doubts of the financial community were put in black and white by reports from major investment firms, which seem written with the ink of suspicion. Autonomous analysts do not mince words: there is a “significant risk in the extremely tight execution times” and evident skepticism about whether Monte’s shareholders “are willing to give up Intesa’s premium to pursue a complex defensive strategy.” Then there is the paradox of the cat chasing its tail: if Intesa’s offer fails, Mps’s stock deflates, and with it evaporates the value of the exchange for Banco Bpm and Banca Generali. Kepler and Equita also raise doubts about the real feasibility of such a simultaneous integration, not to mention the risk that someone across the Alps wakes up: if the hunt opens on Piazza Meda, Crédit Agricole could decide to launch a counteroffer on Banco Bpm to defend its Italian interests.
But the highest obstacle, the one that risks tripping Lovaglio at the finish line, is the time factor. The hourglass is all in favor of Milan. Mps’s board of directors has called the shareholders’ meeting for next October 29. At that meeting, with the bank under the passivity rule after Intesa’s attack, approving the two Ops will require a two-thirds majority. A steep peak, almost impossible to climb without the consent of the major funds. Even if the meeting gives the green light, the two operations would realistically start from February, months after the conclusion of Intesa’s takeover bid, which will presumably close by the end of the year. A time lag that allows Carlo Messina to play ahead and close the Sienese game before Lovaglio can lay the first stone of his new banking hub. At Ca’ de Sass, Siena’s move was not liked at all. More than fear, irritation leaks from Intesa Sanpaolo’s side for what is considered a disturbance to the rules of the game. The lawyers of the group led by Carlo Messina are already considering a complaint to Consob.
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The goal is to analyze under a microscope the official communications made by Lovaglio to the financial community. Intesa suspects that Monte has forced the rigid limits of the passivity rule and that the critical issues that have emerged in recent hours deserve the spotlight of the supervisory authority, to protect market integrity and proper information to shareholders. The battle of Siena has just begun, but judging by the first blows, Lovaglio’s new fortifications will not be enough to save the fortress.
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