Leading governance adviser Institutional Shareholder Service (ISS) has recommended that shareholders of Italian lender Monte dei Paschi di Siena vote against the proposed share issue intended to fund its bid for Mediobanca.
In its report, ISS characterized the deal as "transformational," highlighting its unusual nature due to minimal overlap between the two banks. This lack of overlap diminishes the potential for staff reductions, which typically contribute to cost savings in bank mergers, focusing instead on diversifying revenue sources.
Monte dei Paschi, which received a state bailout in 2017, has since returned to profitability and resumed dividend payments under CEO Luigi Lovaglio. The state has reduced its stake from 68% to 11.7%.
ISS noted that the deal is distinctive due to its hostile nature, aiming to merge different entities, and the size disparity between the bidder and target, with the bidder’s market capitalization being 30% smaller than that of Mediobanca on the unaffected date.
Monte dei Paschi has contended that Mediobanca's market value should be assessed with regard to its significant holdings in Italy's leading insurer, Generali, whose profits represent approximately 40% of Mediobanca's annual income.