Sources say FOCUS-UniCredit’s Orcel was planning an acquisition before Banco BPM was forced to take action

(Repeat Wednesday’s story, no changes to text)

UniCredit last month bid for smaller rival Banco BPM

Prior to this, BPM announced the acquisition of Anima and held shares in MPS

UniCredit CEO Ossel fights on two fronts

Orcel’s M&A credentials put to test as BPM shares soar

Author: Valentina Za and Giuseppe Fonte

MILAN, Dec 11 (Reuters) – UniCredit Chief Executive Andrea Orcel has been working on plans to take over Banco BPM for years and is almost ready to launch, two people familiar with the matter said.

But when Italy’s third-largest bank took M&A action, UniCredit instead of choosing the right time had to rush to make a 10 billion euro acquisition offer, putting Orcel’s deal reputation in jeopardy.

UniCredit, which has faced resistance in its bid to acquire Commerzbank, declined to comment.

BPM announced it would spend 1.6 billion euros ($1.7 billion) to acquire control of fund management company Anima Holding and acquire a 5% stake in Italy’s Monte dei Paschi di Siena (MPS), sending its shares up 12% this week.

That raises the possibility of a tie-up between BPM and MPS that would sideline Italy’s second-largest bank in domestic mergers and acquisitions, forcing Orcel to take action.

On November 22, he told a conference in London that his pursuit of Commerzbank was in trouble and that he would wait for the new government in Berlin to take office.

Just three days later, UniCredit informed Italy’s market regulator before the market opened that it had launched an all-share takeover bid for BPM shareholders.

Orcel has long coveted BPM’s position in Italy’s wealthy Lombardy region, where UniCredit is weaker, but has balked at the takeover premium for its shares, a person familiar with its thinking told Reuters .

His offer now represents a 15% premium to BPM Anima’s pre-acquisition share price, but barely a premium to UniCredit’s pre-acquisition share price. BPM said this undervalued the bank, whose shares are already about 15% higher than UniCredit’s offer.

The professor of banking at Bocconi University said: “UniCredit opened two fronts, both of which are very complex. The market clearly showed that the Banco BPM transaction would not proceed at the price offered. Over time, the market demanded will become more and more expensive,” said Stefano Caselli, President of SDA Bocconi.

Orcel has said he can provide some cash to BPM shareholders and will sit down with “industrial” investors such as Credit Agricole.

“UniCredit, led by one of Europe’s most renowned M&A bankers, must succeed on one of two fronts,” Caselli said. He added: “This will require a bold increase in the offer. UniCredit There is enough cash to pay for it, and rightfully so, walking away from both deals is not an option as things stand.”

Members of Italy’s conservative government opposed Orcel’s proposal as it derailed BPM’s plans to merge with MPS to form a formidable rival to UniCredit and market leader Intesa Sanpaolo.

Orcel has fallen out of favor in Rome since he turned down the chance to buy MPS from the government in 2021, arguing that the billions of euros offered to him were not enough to offset the potential risks and the impact on UniCredit’s capital reserves.

Meanwhile, BPM’s largest shareholder, Credit Agricole, strengthened its position last week by raising its stake in BPM to 15%, in partnership with BPM and UniCredit to sell its products. . Sources told Reuters it could increase that to 19.99%, but a full takeover had been ruled out and had received informal approval from Rome.

The French bank became BPM’s largest shareholder in 2022 after UniCredit failed to acquire BPM.

In what could be a discouraging sign, UniCredit’s chief spokesman warned BPM investors on Saturday that it would oppose Credit Agricole’s strategy in Italy or a merger between BPM and MPS. The LinkedIn post was later deleted, removing the addresses of BPM shareholders.

With Italian takeover rules limiting a company’s ability to block takeovers, BPM is examining how much wiggle room it has.

Meanwhile, Orcel, which has 6.5 billion euros of excess cash, could choose to try to convince BPM shareholders that UniCredit’s future is better.

But time may be against UniCredit, with rising BPM shares putting pressure on Orcel’s pledge to shareholders to ensure a return on M&A deals of at least 15%.

Time will also be on Rome’s favor.

While the government has no power to block the BPM bid, sources told Reuters there could be a lengthy wait for approval required by Orcel under investment screening rules, which would tie up UniCredit in the process for longer than it would like. .

(Writing by Tommy Reggiore Wilkes; Editing by Alexander Smith)