Italian bank Mediobanca has today rejected a takeover offer by state-backed rival Monte dei Paschi di Siena, saying a tie-up would be detrimental to its shareholders because it lacked any strategic and financial rationale.
Monte dei Paschi (MPS) announced a surprise €13.3 billion buyout bid for Mediobanca on Friday, but the value of its all-share offer has declined because of investor scepticism over the planned combination.
A commercial bank rescued by the state in 2017, MPS partners in consumer finance with Mediobanca, which reaps more than a third of its income from its stake in insurer Generali.
Under CEO Alberto Nagel, Mediobanca has bet on wealth management to complement its investment banking operations, while leaving behind its role of kingpin of Italian finance.
MPS shares were down 1.3% this afternoon, having fallen 2% yesterday and by 7% on Friday. Based on the proposed exchange ratio, that indicates a value of €14.46 for each Mediobanca share, which traded instead at €16.07 today.
Mediobanca said in a statement the offer would weaken its business model by drawing clients and bankers away from its investment banking and wealth management businesses.
The board, which will give its formal advice to shareholders only once the bid’s prospectus is public in a few months’ time, also said the tie-up would hurt Mediobanca’s prospective earnings, given that falling interest rates are set to weigh more on MPS.
The rejection was expected after CEO Nagel said in a letter to employees at the weekend the offer had not been previously agreed and the bank would decide how to best protect the interests of its stakeholders.
MPS has returned to profit and dividends after receiving more than €10.5 billion in fresh cash between 2017 and 2022, which it has used to clean up its balance sheet and lay off thousands of staff to slash costs.
Favourable court rulings have also allowed it to release money set aside against legal risks.
The deal has the blessing of the Italian government, which wants to see a third strong banking force emerge to compete with Intesa Sanpaolo and UniCredit.
An MPS stake placement by the state in November brought onboard as shareholders Francesco Gaetano Caltagirone and the holding company of late fellow tycoon Leonardo Del Vecchio.
The two are also the main shareholders in Mediobanca and Generali Italy’s top insurer and a large holder of domestic government bonds.
