The Milan Stock Exchange is reacting to Intesa’s renewed bid for MPS, whilst Unipol stands to benefit

(Il Sole 24 Ore Radiocor) - The Milan Stock Exchange is coming to terms with the relaunch of Intesa Sanpaolo on Banca Monte Paschi Siena and with the commitment from Rocca Salimbeni’s largest shareholder, the Del Vecchio family’s Delfin, to accept Ca’ de Sass’s offer. The shares of the companies involved in this game of Risk are thus seeking a new equilibrium following the turning point that came over the weekend, which could prove decisive for Siena’s future. Whilst the share prices of MPS and Intesa Sanpaolo are essentially neck and neck, the leader is Unipol, which is up by over $3, whilst at the opposite end of the FTSE MIB isMediobancais down by over 5 per cent. Last Saturday, Intesa announced an increase in the cash component of the OPAS by 25 cents per share (to €1.25), bringing the value of the transaction to 31.4 billion, csubject, however, to the MPS shareholders’ meeting on 29 October rejecting the defence plan drawn up by CEO Luigi Lovaglio, which includes the OPS on Banco Bpm and Banca Generali, as well as the distribution to shareholders of 4 billion in cash and shares Generali. Yesterday, then, came Delfin’s formal commitment to accept the offer and to vote at the MPS shareholders’ meeting in line with the terms of the OPAS. Intesa has also called on shareholders to reject the merger between MPS and Mediobanca, believing it preferable to carry out the integration only after the offer has been finalised. Finally, Ca’ de Sass’s plan provides for the sale of half of the MPS branch network (as well as other assets, including the headquarters and the brand) to Unipol, which will merge it with Bper Banca .

With just under a month to go before the MPS shareholders’ meeting, the announcements over the weekend – and in particular Delfin’s decision to take a stand with its 17.6 per cent stake – seem to have already set the course of events in a very specific direction. Although no other MPS shareholder has officially spoken out, it is in fact likely that a ‘no’ to Lovaglio’s plan will also come from Francesco Gaetano Caltagirone and his 13.5 per cent stake, whilst it remains to be seen what advice the proxy advisers will give in the face of the risk that Intesa’s OPAS might lapse. The road to securing the two-thirds majority (if turnout is around 70 per cent, this means ‘yes’ votes will need to come from 46.7 per cent of the share capital) required to approve Lovaglio’s counter-measures and overcome the constraints of the passivity rule therefore appears to be an uphill struggle.

At current share prices, however, Intesa’s OPAS under the new terms still carries a premium of 0.8 per cent over the price of MPS shares. The Siena-based OPA offers for Banco BPM and Banca Generali, which initially envisaged a zero premium and a 10 per cent premium respectively, now show premiums that have risen to 4 per cent and 14 per cent, a sign that the market considers a successful outcome of the offers unlikely. Meanwhile, Intermonte analysts calculate that Intesa’s revised bid “does not limit the value creation of the deal, in terms of an increase in earnings per share (amounting to around 8 per cent), and has a marginal impact on capital (around 20 basis points)”. The announcement from Ca’ de Sass, the SIM concludes, “enhances the economic appeal of the bid but indicates a hardening of Intesa’s stance ahead of the MPS shareholders’ meeting”. This will effectively present shareholders with an ultimatum between Messina’s and Lovaglio’s plans.

“Now that Delfin has accepted Intesa’s improved offer, the situation has changed significantly,” commented Jérôme Legras, head of research at Axiom Alternative Investments – “It therefore seems increasingly likely that the process is moving towards a conclusion and that the shareholders’ meeting will not approve the two MPS transactions”, although “in a transaction of such complexity, it would be unwise to rule out the possibility that another unexpected move might still emerge”. On the other hand, he continued, “Intesa has also hinted that it might not go ahead with, or might delay, the merger with Mediobanca”: this “took the funds that trade on merger arbitrage by surprise, causing Mediobanca’s share price to plummet”. As for the implications for BPER, Barclays’ analysts note that the bank “will benefit from the success of Intesa’s bid for MPS, through the acquisition of the MPS brand and selected branches, as well as the significant cost and revenue synergies arising from the integration”. The “strengthening of Intesa’s position following the weekend’s announcements” is therefore “also positive for BPER (+1.76%)”, the analysts conclude.