UniCredit CEO says Banco BPM offer is ‘starting point’

(Bloomberg) — UniCredit SpA Chief Executive Andrea Orcel said he is willing to increase his bid for domestic rival Banco BPM SpA.

Orser said in an interview with Bloomberg Television in Davos on Tuesday that the terms proposed by UniCredit were a “fair starting point” although it was “too early” to make a decision on potential improvements. He also said he expected UniCredit’s share price to outperform BPM Bank’s, which could make an all-share takeover bid more attractive to investors at smaller rivals.

Two months ago, Orcel launched a surprise acquisition of Banco BPM, providing 0.175 new UniCredit shares for each share of Banco BPM. The move surprised officials in Rome and was rejected by BPM Bank’s leadership as too junior.

Italy has been preparing to begin a formal review of UniCredit Bank’s unsolicited offer to acquire Banco BPM, Bloomberg reported earlier this month. If the deal is approved, conditions may be attached to the process under the government’s “golden power” rules.

Auxerre said he was optimistic he could swing Roma in his favour. He said the Gold Power Review was a “structured” process that gave UniCredit “an opportunity to sit down” with the government to explain the deal.

The share exchange ratio proposed by UniCredit represents little premium to Banco BPM’s pre-bid closing price. That currently implies a price of around €11.6 billion ($11.8 billion) for Banco BPM, compared with the bank’s market capitalization of €12.5 billion, suggesting shareholders expect a higher offer to eventually materialize.

Orcel said in an interview on Tuesday that the exchange rate premium on offer was as much as 20% compared to the price at which the bank was trading in the month before the bid. He also said there were “rumors” that Banco BPM might not benefit from an accounting effect known as the “Danish Compromise” in its takeover of Italian asset manager Anima Holding SpA, which could derail the proposed deal.

“We believe we are significantly undervalued and [Banco BPM] “Could be fair or overvalued,” Oser said. “Let’s see how the bank performs in the first and second quarters and see if Anima is done” before deciding whether to raise UniCredit’s valuation, he said. Quotes from Small Banks.

“At this time, we stand by our proposal, which we believe is appropriate,” Ossel said.

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