Orcel UniCredit was planning a bid before Banco BPM forced it out, sources said

By Valentina Za and Giuseppe Fonte

MILAN (Reuters) – UniCredit Chief Executive Andrea Orcel has been drawing up plans to take over Banco BPM for years and was almost ready to pull the trigger, two sources close to the matter said.

But rather than being able to pick the right moment, UniCredit had to rush a €10 billion bid when Italy’s third-biggest lender made its own M&A moves, putting Orcello’s deal-making reputation on the line.

UniCredit, which has already faced hurdles in its pursuit of Germany’s Commerzbank (ETR: ), declined to comment.

BPM shares jumped 12% in the week between announcing a €1.6 billion ($1.7 billion) bid to take control of fund manager Anima Holding and that it had bought 5% of Italy’s Monte dei Paschi di Siena (MPS). .

That raised the prospect of a tie-up between BPM and MPS, which would see Italy’s second largest bank on the sidelines of domestic M&A, forcing Orcello’s hand.

On November 22, he said at a conference in London that his search for Commerzbank was stuck and that he would wait for the new government in Berlin.

Just three days later, UniCredit notified the Italian market regulator before the opening of trading that it had launched a buyout offer for all shares to BPM shareholders.

Orcel has long coveted BPM’s position in Italy’s wealthy Lombardy region, where UniCredit is weaker, but has lost out on the M&A premium in its shares, a person familiar with his thinking told Reuters.

It was now offering a 15% premium to BPM’s pre-Animana share price, but almost no premium to the pre-UniCredit share price. BPM said this undervalued the bank and its shares rose to around 15% above UniCredit’s offer price.

“UniCredit opened two fronts, both very complex. The market clearly says that the Banco BPM business is not going through at the offered price. As time goes by, the price the market demands is getting more and more expensive,” said Bocconi University banking professor and SDA Bocconi dean Stefano Caselli.

Orcel has signaled that it could offer BPM shareholders some cash and would sit down with ‘industry’ investors starting with French bank Credit Agricole (OTC:).

“Under the leadership of one of Europe’s most famous M&A bankers, UniCredit must succeed on one of two fronts,” Kaselli said, adding: “For that, it is necessary to boldly supplement the offer.” UniCredit has the cash to pay and it should, abandoning both contracts is not an option as things stand.”

FROM THE CLASS

Members of Italy’s conservative government oppose Orcello’s proposal because it scuppers plans to join BPM with MPS to create a strong rival to UniCredit and market leader Intesa Sanpaolo (OTC:).

Orcel has fallen out of favor in Rome since rejecting the chance to buy MPS from the state in 2021, deeming the billions of euros offered to him insufficient to offset the potential risks and impact on UniCredit’s capital reserves.

Meanwhile, BPM’s largest shareholder Credit Agricole, which partners with both BPM and UniCredit to sell its products, strengthened its hand last week by raising its stake in BPM to 15%. That could raise that percentage to 19.99 percent, but has ruled out a full takeover and has Rome’s informal blessing, the sources told Reuters.

The French bank became the largest shareholder of BPM in 2022 after UniCredit’s bid for BPM was rejected.

In a sign of possible frustration, UniCredit’s chief spokesman warned BPM investors on Saturday about the strategy of Credit Agricola in Italy or the merger of BPM and MPS. The LinkedIn post was later truncated, with the address of the BPM shareholder removed.

With Italian takeover rules limiting a company’s ability to thwart a bid, BPM is examining how much leeway it has.

Meanwhile, Orcel, which has 6.5 billion euros of excess cash, has options to try to convince BPM shareholders that their future is better with UniCredit.

But time could be working against UniCredit, with BPM’s rising share price putting pressure on Orcel’s promise to its shareholders to ensure M&A deals return at least 15%.

Time may also play into Rome’s hand.

While the government does not have the power to block a bid for BPM, sources told Reuters that the approval Orcel needs under investment screening rules could require a long wait, tying UniCredit in the process longer than it would like.

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