Monte dei Paschi Launches €34 Billion Twin Bid for Banco BPM and Banca Generali to Dodge Intesa Takeover

Monte dei Paschi di Siena just made one of the boldest moves in Italian banking in years. On Friday, the bank's board approved simultaneous all-stock offers worth roughly €34 billion for Banco BPM and Banca Generali, according to Reuters. The goal: build a third Italian banking giant big enough to make a hostile takeover attempt by Intesa Sanpaolo, Italy's largest bank, go away.

MPS CEO Luigi Lovaglio told analysts on a call that the combined group would have a pro forma market cap of about €80 billion, landing among Europe's top ten banks and second in Italy for customer loans and branch network, according to Euronews. He called it a friendly, non-hostile combination, insisting MPS creates value "through integration, not through carving things up," per Sky TG24.

The Numbers

The Banco BPM offer is worth about €25.3 billion, with MPS handing over 1.567 newly issued shares for every BPM share tendered. The Banca Generali offer comes to roughly €8.7 billion, at an exchange ratio of 6.958 MPS shares per Generali share. Both are share-only. No cash for the target shareholders, according to Euronews and europeanbusinessmagazine.

MPS is also dangling a sweetener for its own shareholders: an extraordinary €4 billion distribution, split between roughly €1 billion in cash and the rest in shares of insurer Generali, which MPS holds through its Mediobanca stake, according to Reuters. That beats the roughly €3 billion cash Intesa is offering MPS investors as part of its own bid.

Why This Is Happening

Intesa Sanpaolo, working alongside Unipol and Bper Banca, launched a €36 billion cash-and-share hostile bid for MPS. Because MPS is now a takeover target itself, it's bound by Italy's passivity rule, a regulation that blocks a target company from taking defensive actions like this without shareholder sign-off. That's why MPS shareholders had to hold an extraordinary general meeting on Thursday, August 20, clearing the way for Friday's formal bid, according to Euronews.

The largest MPS shareholders are the Del Vecchio family's Delfin vehicle at 17.5%, the Caltagirone group at 10.2%, BlackRock at 5%, Italy's Ministry of Economy and Finance at 4.8%, and Banco BPM itself at 3.7%. Under Italian takeover rules, at least two-thirds of MPS shareholders need to approve the plan in a vote scheduled for October 29, according to Reuters.

There's a French wrinkle too. Crédit Agricole holds close to a third of Banco BPM's shares, and Reuters reported that MPS already tried to strike a friendly deal with BPM earlier this year, only to have talks collapse in July after Crédit Agricole objected. Both Crédit Agricole and Generali declined to comment on Friday's bids.

Investors Aren't Buying It, Literally

The market reaction was lukewarm at best. By midday Friday, Banco BPM shares were down 0.5%, Banca Generali fell 2.6%, and MPS itself slipped 0.8%, according to Reuters. Analysts at Third Bridge said the plan makes strategic sense but called it "a purely defensive move" against Intesa, and questioned whether MPS can "realistically integrate multiple banks at the same time."

MPS is trying to digest two large, complex financial institutions simultaneously while also fending off a hostile suitor, all within a matter of months. Third Bridge's analysts noted the plan lines up with Rome's long-standing goal of building a third national banking champion to rival Intesa and UniCredit, but pulling off a triple-header merger is a different animal than a single acquisition.

The Long Shadow of 2017

None of this is coincidental. MPS, founded in 1472 and the world's oldest bank still operating, needed a state bailout in 2017 after years of bad loans and losses. Some older reporting, including a Breitbart piece flagging Italy's non-performing loan crisis and warning of possible bank runs, describes a much darker period for Italian banking, when b