MILAN, Jan 8 (Reuters) - Italy's Banca Ifis surprised the market with a 298 million euro ($309 million) bid in both shares and cash for illimity, a competing specialty lender, in an effort to strengthen its position in a fiercely competitive industry.
This unexpected bid signals an acceleration in consolidation within the Italian banking sector and highlights the increasing prevalence of unsolicited offers, a rarity in finance. UniCredit, Italy's second-largest bank, has also made a bid for Banco BPM, a smaller rival, while Banco BPM has rejected the offer in an attempt to fend off its pursuit of fund manager Anima Holding.
Illimity offered no immediate response to the bid.
Both Ifis and illimity focus on providing financing to small and medium-sized enterprises. Additionally, Ifis operates a distressed loan recovery business, a segment that illimity is phasing out.
Under the terms of the offer, Ifis will pay 14.14 euros in cash and issue new shares in exchange for every 10 illimity shares tendered, valuing each illimity share at 3.55 euros based on Tuesday's closing prices.
The 5.8% premium offered by Ifis exceeds the 0.5% premium proposed by UniCredit for BPM, yet falls below the 8.5% premium that BPM is offering for Anima.
Ifis anticipates launching the bid in June pending regulatory clearances, with the objective of acquiring at least 67% of illimity shares to delist it.
As of 1114 GMT, illimity's shares had risen by 10.5% to 3.74 euros, reflecting investor optimism for potentially improved terms. Ifis, based in Venice, saw its shares decline by 1%.
In 2024, illimity's shares experienced a 40% drop, trading at a 70% discount to book value. Conversely, Ifis shares soared by one-third last year, propelling its market capitalization over 1.1 billion euros.
Over the same period, Italy's banking sector saw a 50% increase, narrowing the median price-to-book discount to 10%.
Ifis CEO Frederik Geertman affirmed the fairness of the bid price, stating, "We stand by this offer for now." He also assured illimity shareholders of benefiting from "generous" dividend payments owing to Ifis' strong history of payouts.
Geertman forecasted a profit exceeding 250 million euros in 2027, supported by annual pre-tax benefits of 75 million euros from the merger, two-thirds of which would stem from cost reductions.
Ifis aims for a 2024 net profit target of 160 million euros, while illimity reported a profit of 31 million euros in the first nine months of the same year.
Illimity, founded by veteran Italian banker and former minister Corrado Passera, is a digital-only, cloud-based bank, with backing from former Barclays CEO Bob Diamond. The bank debuted on the Milan Stock Exchange in March 2019 at 7.3 euros per share.
Since reaching highs of nearly 14 euros in late 2021, illimity's share price suffered a decline following business model adjustments and a reduction in its distressed loan operations.
Italy's bad loan market, the largest in Europe, has contracted due to enhanced credit quality among banks. Stricter regulations since 2021 have increased the complexity for debt recovery specialists.
In November, illimity agreed to sell a majority stake in its technology assets to private equity firm Apax.
Ifis estimates integration costs for illimity at 110 million euros, a portion of which will likely be offset by the capital generated from acquiring the bank below book value.
If the offer achieves full success, La Scogliera, Ifis' controlling shareholder and the holding company of Italy's Furstenberg family, will own 45% of the combined entity, holding 50.5% of Ifis at present.
($1 = 0.9656 euros)