MPS Announce Plans to Buy Mediobanca for $14 Billion

Driving the consolidation wave in the Italian banking sector, world’s oldest bank Monte dei Paschi di Siena (MPS) on Friday said that it was launching of a $13.9 billion all-share buyout bid for merchant bank Mediobanca by offering 23 of its own shares for every 10 Mediobanca shares – a 5% premium on Thursday’s (January 23) closing price.

Announcing the bid offer, MPS said that the combination with Mediobanca will create a new national champion ranking among the top three institutions in terms of total assets, loans to clients, direct deposits and total financial assets.

The new group will be able to rely on Mediobanca’s distinctive expertise in the areas of Wealth Management, Corporate & Investment Banking and Consumer Finance and of MPS in the sectors of Retail and Commercial Banking.

In this way, the global service offerings will be strengthened, the products base will be enhanced and market penetration will be improved. The combination will enable the assumption of a primary role in the asset gathering through the combination of Banca Widiba with Mediobanca Premier. The group will be financially strengthened, with a diversified revenue stream and strong resilience able to compete successfully in different scenarios, MPS said.

 “The new group will protect and favour the development of the two already strong brands MPS and Mediobanca, preserving their unique position and know-how and allowing Italian families and companies to access a wider and more integrated platform of banking services”, MPS explained the reason for the takeover bid.

Over the past three years, MPS has steadily strengthened its fundamentals, consolidating the sustainability of its business model and improving its risk profile to achieve solid levels of profitability.

“Moreover, MPS has exceeded most of the targets of the 2022-2026 business plan two years in advance and with one of the strongest capital positions in Europe,” MPS said.

New Approach

MPS CEO Luigi Lovaglio, said that with this operation of an industrial nature, MPS want to mark a new approach in the path towards the consolidation of the banking sector which, in an innovative manner, immediately creates value for both MPS and Mediobanca stakeholders, and he also believes for the entire country.

“We aim for a new national champion, two brands of excellence, which we want to protect and promote even more,” he said.

 He also said that the economy ministry, which MPS’s biggest shareholder as it still has a 11.2% stake after a 2013 bailout, had not objected to the bid.

Deputy Premier and Foreign Minister Antonio Tajani supported the takeover bid of MPS saying that they have always been in favour of the free market if it serves to strengthen the banking system, which is already healthy in Italy, more so than other one.

However, Mediobanca said it considers MPS’s bid to be hostile.

The share price of MPS fell by 6.9% to $6.82 while Mediobanca’s share price gained 7.7% to $16.51 on the Milan stock exchange on Friday. Shares of MPS valued around $77.73 million changed hands, compared with $13.65 million on Thursday, while $25.21 million worth of Mediobanca shares were traded.