Breakingviews - Mediobanca great escape has more twists ahead
After MPS made an unsolicited offer for Mediobanca in January, the Milan-based group's boss put together an alternative path with a 6-billion-euro plan to buy Banca Generali (BGN.MI), opens new tab, a wealth manager owned by insurer Assicurazioni Generali (GASI.MI), opens new tab. By moving to create a large money-management business, Nagel has boosted his stock. Mediobanca now trades around 9% above the value of the all-share MPS offer. One interpretation is that investors are excited about the prospect of an enlarged wealth player if the Banca Generali deal goes through.
One complicating factor, however, is that some of Nagel's biggest shareholders are not yet endorsing the Banca Generali purchase, which requires 50% approval at a June 16 Mediobanca shareholder meeting. Billionaire Francesco Gaetano Caltagirone, who owns 10% of Mediobanca and 5% of MPS, has said that Nagel's deal lacks industrial logic. He has also been buying stock ahead of the meeting, which may partly explain why Mediobanca's shares have risen.
Then there's Delfin, which owns nearly 20% of Mediobanca and a tenth of MPS. If that vehicle and Caltagirone oppose the Banca Generali acquisition, Nagel would need a minimum 60% vote turnout and the support of most other shareholders to carry the day.
He may feel OK about that risk, since other shareholders have backed the deal. But the next question is whether the insurer Assicurazioni Generali, which owns 50% of the similarly named wealth manager, will agree to sell to Mediobanca and at what price. The slim current 9% premium versus Banca Generali's undisturbed price, and the fact that Nagel is offering to pay in kind through Mediobanca's shares in Generali, make the deal vulnerable to a cash counteroffer from a rival suitor. And Generali cannot be seen to give a sweet deal to Mediobanca, its biggest shareholder.
The third challenge is MPS itself. True, CEO Luigi Lovaglio seems to be in a tight spot. Just to get its offer up to the current value of Mediobanca, MPS might need to raise its 15-billion-euro bid by over 1 billion euros. Yet by paying much more for his larger rival, Lovaglio risks chasing his tail: his own share price would probably fall, depressing the value of the bid.
Yet Lovaglio has other options. He currently wants two-thirds of investors to accept his soon-to-be-launched tender offer, a level that would allow him to merge the two banks and enjoy all the deal benefits. But he could settle for a lower threshold of 50%, or below. And if Delfin and Caltagirone backed him, he would already be at 30%.
Such a move would be sub-optimal. With a lower take-up, Lovaglio would be under pressure to buy the rest, and might not get some or even most of the deal's synergies, which include 300 million euros of cost savings as well as tax benefits. Yet he could still exert control over his target. Mediobanca, meanwhile, would get the disruption of a takeover, and a more complex governance. Nagel's great escape is not yet complete.
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