Luigi Lovaglio, CEO of Monte dei Paschi (MPS), has been working tirelessly since the beginning of 2022 when Italy's Treasury appointed him to revitalize the world's oldest bank, five years after its bailout. In October 2022, he orchestrated a late-night share sale effort as MPS encountered last-minute complications, struggling to sell shares at 2 euros each at that time.
This week, MPS stock was trading at 7 euros when Lovaglio and his finance chief Andrea Maffezzoni announced a ($14 billion) all-share takeover bid for Mediobanca, a larger rival and Italy's historic investment bank, following back-to-back all-nighters.
Supported by over 10 billion euros in cash infused between 2017 and 2022, MPS managed to tidy up its balance sheet, positioning itself to benefit from higher rates and join the wave of consolidation sweeping through Italy's banking sector.
Amid concerns about the bid's impact on Mediobanca, Lovaglio stated, "We don't want to take any action that can in some way weaken the powerful organization that Mediobanca is," expressing a conciliatory stance.
Analysts noted the contrasting profiles of Mediobanca and MPS, linked mainly by significant common shareholders, which include Delfin and Francesco Gaetano Caltagirone. The unexpected bid triggered a sell-off, with MPS shares closing down 7%.
As discussions unfolded, Delfin and Caltagirone, who also have stakes in Italian insurer Generali, criticized Mediobanca's CEO for his heavy reliance on Generali's income, aligning with the government's concerns about capital moving out of Italy.
Despite initial setbacks with Banco BPM, a planned merger, Lovaglio revealed that Mediobanca was presented as a merger option for MPS to Italy's economy minister in December 2022, alongside potential tie-ups with other peers.
The bid, propelled by Delfin and Caltagirone's increased stake in MPS, has gained government support, with considerations of the Natixis-Generali collaboration influencing their stance. However, Mediobanca's CEO Nagel has resisted engaging with MPS and appears ready to oppose the offer.
"We're beside ourselves," expressed a senior MPS employee in Siena anonymously, highlighting enthusiasm for the potential deal. Mediobanca has yet to comment on the bid.