Breakingviews - Mediobanca's new M&A punt less crazy than it looks
Nagel's April plan to buy Banca Generali from insurer Assicurazioni Generali (GASI.MI), opens new tab aimed to give Mediobanca shareholders an alternative to a deal with Banca Monte dei Paschi di Siena (MPS) (BMPS.MI), opens new tab. By creating a leader in wealth management, his bank would merit a higher multiple, making a 17 billion euro bid from retail lender MPS less appealing. Wealth managers are valued at 15 times forward earnings, as per LSEG data, whereas MPS's bid currently values Mediobanca at just over 11 times.
The Banca Generali deal vote imploded in June due to opposition from two powerful investors, Francesco Gaetano Caltagirone and Delfin, also shareholders in MPS, who collectively own at least 27% of Mediobanca. Moreover, various Italian investors also looked set to oppose the deal, snapping up 11% of Mediobanca's shares ahead of the vote. Potential opponents included Andrea Orcel's UniCredit (CRDI.MI), opens new tab and several small Italian pension funds. With the Italian government owning an 11.7% stake in MPS, some shareholders may have balked at anything undermining the MPS bid, which Rome had endorsed.
Nagel on Wednesday brought forward a new vote on the Banca Generali deal to August 21, which coincides with MPS's own offer for his bank. It's a time when Italian investors are more likely to be on the beach than at a shareholder meeting. But there are reasons why Mediobanca might stand a better chance than in June.
Greater political scrutiny, opens new tab of the local pension funds might make them less likely to vote against the deal. UniCredit, which owned 2% in June, Reuters says, may have wanted government support for its acquisition of Banco BPM (BAMI.MI), opens new tab, but that deal has now collapsed. Lastly, some Mediobanca shareholders have sold in recent weeks, so more stock may be held by investors like hedge funds, who are more likely to support the Banca Generali bid.
Nagel's gambit is having some effect. Mediobanca is now worth almost 4% more than MPS's offer. While that's less than the 14% gap in May, it has doubled from a week ago.
Even if Nagel gets shareholder support, he will need to negotiate and close the deal with Banca Generali. Yet a successful vote should nudge up Mediobanca's shares, which might help secure a higher price from MPS CEO Luigi Lovaglio. Nagel's original decision to delay the vote was seen by market observers as a sign of meddling by local players and the government in Italian deals. Victory would ease that fear.
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