Introduction
Leading governance adviser Glass Lewis has endorsed the takeover bid for Mediobanca by Monte dei Paschi (MPS), urging shareholders to approve the necessary share issuance in an upcoming vote on April 17.Context
Glass Lewis acknowledges the tangible execution risks associated with the combination of Mediobanca and MPS, particularly concerning cultural integration and potential disruptions to Mediobanca's operations. Nevertheless, the firm believes that MPS has presented a convincing strategic and financial rationale for pursuing the acquisition.Developments
MPS, which played a central role in Italy's banking crisis until a state bailout in 2017, made headlines this year by bidding for Mediobanca, a highly regarded financial institution. This bid is notable due to the complementary nature of the two banks' business models, which typically limit cost-cutting overlaps in bank mergers.MPS is focusing on tax credits from past losses, which would be more beneficial if it secures more than 50% of Mediobanca's shares. The bank aims to enhance revenues and reduce certain costs by consolidating roles like risk control. According to MPS, the minimal overlaps between the two banks will help mitigate execution risks, maintaining Mediobanca's brand and operations as a separate entity.
MPS CEO Luigi Lovaglio intends to appoint a separate CEO for Mediobanca, emphasizing his expertise in commercial banking rather than investment banking. Glass Lewis points out that merging a retail bank with a capital markets advisory franchise is not unprecedented and recommends that shareholders consider Lovaglio's proven track record in managing complex mergers and acquisitions effectively.