Banca Popolare di Milano (BPM) on Tuesday rejected an unsolicited €10 billion takeover offer from competitor UniCredit, saying it undervalued the bank, tied its hands in strategic deals and created new risks for shareholders.
BPM said the 0.5% premium offered was “unusual for this type of offer” and complained it created problems for its acquisition of fund manager Anima Holding.
UniCredit’s bid for BPM also represents an obstacle for the Italian government, which had advanced plans for a merger of BPM with its competitor Monte dei Paschi di Siena, which it believed would strengthen its banking sector without harming competition.
After a meeting held on Tuesday, the BPM board concluded that UniCredit’s offer “in no way reflects the profitability of Banco BPM, nor the potential to create more value for shareholders.”
BPM said its shareholders would also be exposed to uncertainty linked to UniCredit’s expansion plans in Germany, where CEO Andrea Orcel has been working on a possible bid for Commerzbank.
UniCredit’s offer triggers a “passivity rule” that prevents management of an acquisition target from doing anything that could thwart the offer without calling a shareholder meeting to obtain approval. This prevents Banco BPM from raising the price of its offer for Anima.
Orcel said on Monday his bank could not afford to be sidelined as consolidation in Italy accelerated.
Banco BPM shares closed on Monday with a rise of 5.5%, to 7 euros, above the 6.657 euros per share offered by UniCredit in its global offer, a sign that the market considers that the premium of 0, 5% of the offer is too low.
Orcel acknowledged on an investor call Monday that the offer price was close to the market price, noting that a cash component could be added later.
The offer is non-binding and must be confirmed within 20 days, within which UniCredit must submit the offer document to the Italian market regulator.
UniCredit shares, boosted by generous compensation during Orcel’s first three and a half years at the bank, were flat on Tuesday after a 4.8% drop the previous day.
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