MPS and ISS oppose the OPA offers for BPM and Banca Generali and the 4 billion maxi-dividend
The proxy adviser recommends voting against the two offers launched by Siena, but says “yes” to the MPS-Mediobanca merger
No to the acquisition of Banco BPM and Banca Generali and to the 4 billion bonus payment; yes to the merger with Mediobanca. Following in the footsteps of MPS’s major shareholders, ISS has also come out against the plan devised by CEO Luigi Lovaglio to fend off Intesa Sanpaolo’s takeover bid, and has endorsed only the proposal to integrate Mediobanca. The proxy advisor – effectively one of the two major ‘advisers’ to investors alongside Glass Lewis, and capable of influencing the voting behaviour of institutional investors – made its position clear last night.
And the verdict is clear-cut. Specifically, the vote is against items 3, 4 and 5 on the agenda of the Siena shareholders’ meeting on 29 October, the very same points that Intesa Sanpaolo has railed against; it is no coincidence that it has made the adjustment to the cash component of its bid – increasing it by 800 million – conditional upon the MPS shareholders’ meeting rejecting precisely those points.
Iss sees this, first and foremost, as a problem of execution and corporate cultures that are too complex to integrate: acquiring BancoBpm and Banca Generali ‘would increase the execution risk already present in the integration of Mediobanca’ and would ‘in all likelihood result in a three- or four-way merger involving different cultures and processes’, says the proxy. But that is not all: to proceed with this massive integration, a cohesive governance structure would be required, with a board of directors and management that are ‘united’ – a structure from which MPS is currently far removed, finding itself instead fragmented, as demonstrated by a divided board.
ISS’s voting recommendation effectively constitutes indirect support for Intesa Sanpaolo’s hostile takeover bid. However, the proxy statement seeks to clear up any misunderstandings. ‘That is not the case,’ points out the American company, which instead emphasises that the Ca’ de Sass takeover bid is ‘merely one possible alternative that shareholders should carefully evaluate when examining the proposed transactions’ and that it ‘is not without its issues: for example, the board continues to believe that the offer undervalues MPS’. ‘The reality is that, even when considered in isolation, the available facts and disclosures do not support the proposed transactions’. The crux of the matter is that shareholders are being asked to ‘double’ the size of the bank, but ‘as things stand, there is no access to due diligence, no definitive price, no commercial or governance agreement with the significant or controlling shareholders of either of the two target companies, nor any certainty that the transactions will go ahead’.
Throughout the 38-page report, ISS goes into detail and, having given a favourable opinion on all the ordinary items on the agenda, recommends a ‘vote against’ first and foremost on the proposed acquisition of Banco BPM. The ‘execution risks’ are deemed too ‘significant’, particularly in the absence of a prior agreement with Crédit Agricole, the largest shareholder with a 30 per cent stake, which has, moreover, already expressed opposition to the prospect of a merger with Siena. As for Banca Generali, however, strengthening the wealth management business would make sense, but ‘the integration risk is a major concern at this stage’. And in this case too, ‘it could be difficult to secure cooperation’ from Generali, which holds a 50.2 per cent stake. ISS has also delivered a categorical ‘no’ on the mega-dividend, because ‘it would render Intesa’s offer ineffective, thereby eliminating a strategic option currently available to shareholders without offering a commensurate benefit’.
