UniCredit Proposes $10.5 Billion Acquisition of Banco BPM

Italian banking giant UniCredit announced on Monday its offer to acquire domestic rival Banco BPM for approximately €10 billion ($10.5 billion). This proposed all-stock transaction aims to consolidate two of Italy’s largest lenders, bolstering UniCredit’s position as a leading pan-European banking group.

UniCredit is offering €6.657 per Banco BPM share, slightly higher than the latter’s Friday closing price of €6.644. While shares of UniCredit fell by 4.8% following the announcement, Banco BPM shares surged by 5.5%.

Strategic Move Amid Banking Consolidation

This proposed acquisition is part of a broader trend of mergers and acquisitions in the European banking sector, driven by a push for consolidation in the face of changing market dynamics. Despite the Banco BPM deal, UniCredit emphasized that this move is separate from its pursuit of Germany’s Commerzbank, where it has been increasing its stake throughout the year.

In September, UniCredit raised its stake in Commerzbank to 21%, with plans to boost it further to 29.9%. However, the German government, Commerzbank’s largest shareholder with a 12% stake, has not yet approved this expansion. German Chancellor Olaf Scholz expressed reservations about potential hostile takeovers, further complicating the situation.

Banco BPM’s Recent Activity

Banco BPM has also been active in the financial markets, recently making a €1.6 billion bid for asset manager Anima and acquiring a 5% stake in state-owned lender Monte dei Paschi di Siena.

Challenges and Risks

Industry analysts, including JP Morgan’s Kian Abouhossein, have raised concerns about the feasibility of UniCredit managing both the Banco BPM acquisition and its Commerzbank ambitions simultaneously. Abouhossein noted that regulatory hurdles, integration challenges, and the complexity of executing two major transactions in a short timeframe could pose significant risks.

Even if the deals were staggered by nine months or more, he suggested, UniCredit CEO Andrea Orcel might face significant challenges in navigating the regulatory and operational demands of these dual acquisitions.

Strong Financial Performance

Despite these challenges, UniCredit continues to post robust financial results. In its most recent earnings report on November 6, the bank reported an 8% year-on-year increase in quarterly net profit to €2.5 billion, surpassing market expectations. The bank also raised its full-year profit guidance to over €9 billion, up from €8.5 billion.

As UniCredit explores these strategic moves, the banking sector will closely watch the outcome of its dual acquisition pursuits, which could reshape the competitive landscape in both Italy and Europe.