Italy's banking endgame comes down to one shareholder vote

The contest for Banca Monte dei Paschi di Siena will be settled on 29 October, when MPS shareholders vote on whether chief executive Luigi Lovaglio may pursue all-share bids for Banco BPM and Banca Generali. Intesa Sanpaolo, Italy's largest lender, has made the choice binary: if investors approve either acquisition, or the €4bn extraordinary distribution that accompanies them, its own offer for MPS lapses.

Intesa has also put money behind the outcome. In early October it raised the cash leg of its exchange offer by 25 cents to €1.25 per MPS share, alongside 1.6 new Intesa shares, adding about €800m and lifting the bid to roughly €35bn at market prices. The extra cash is payable only if the defence plan is rejected, and Delfin, the Del Vecchio family holding company with 17.6% of MPS, has committed to tender its entire stake.

How the offer has moved since June

Intesa launched its tender and exchange offer on 8 June with a total value of €30.6bn: 16 new Intesa shares for every 10 MPS shares plus €1.00 in cash, implying €10.091 per MPS share and a premium of about 12.5% to the 5 June volume-weighted average price. The offer is conditional on Intesa reaching at least 66.67% of MPS's capital, a threshold it can waive, although it has said it does not plan to waive its conditions.

Most of the rise in headline value since then reflects share prices rather than generosity. The October sweetener increased the cash component by 25% to €3.8bn but the overall value by only 2.3%, based on MPS's closing price before the announcement. Competition concerns are handled through a binding agreement to sell Unipol Assicurazioni a standalone bank containing about 635 MPS branches, the MPS brand and most central functions, for an estimated €3.0bn–€3.5bn. Intesa would keep Mediobanca, about 625 branches and activities accounting for roughly 80% of the combined net income of MPS and Mediobanca, and targets about €2.9bn of annual pre-tax synergies by 2029.

Lovaglio's alternative

MPS, valued at about €36bn after it bought Mediobanca, responded in August with two simultaneous all-share offers worth about €34bn combined. Banco BPM holders were offered 1.567 new MPS shares each, valuing the bank at about €25.3bn with no premium to the prior close; Banca Generali holders were offered 6.958 shares, about €8.7bn and a 10% premium. MPS put annual pre-tax synergies at about €2.6bn and proposed a €4bn distribution, part cash and part shares in Generali, in which it holds 13.3% through Mediobanca.

Lovaglio presented MPS as the "natural partner for a friendly aggregation". The plan depends on targets as well as on MPS's own investors, and it has already lost one: Crédit Agricole, which owns 29.3% of Banco BPM, said it would not tender, with chief executive Olivier Gavalda calling the offer "not attractive enough".

Where the votes sit

The register now leans towards Intesa. Besides Delfin, the Benetton family's Edizione, with 1.45%, has backed the offer, and Francesco Gaetano Caltagirone's holding company, which Reuters puts at 10.26% of MPS, will vote against both acquisitions and against a proposed MPS–Mediobanca merger. According to Alliance News, Caltagirone, Benetton and Praude together exceed 33%, which would make the two-thirds majority of capital represented that the plan needs very hard to reach. Recommendations from the proxy advisers ISS and Glass Lewis were still pending as the MPS board met on 12 October, and analysts cited by Alliance News said MPS could withdraw its proposals or try to postpone the meeting.

The Italian Treasury remains an MPS shareholder, and Prime Minister Giorgia Meloni has said she hopes MPS will not be broken up, which is in effect what Intesa's Unipol arrangement would do to the Siena franchise.

What the vote decides

Both camps are bidding for much the same prize: the Mediobanca business and the Generali stake that came with it. A rejection on 29 October would leave Intesa's offer as the only route on the table, subject to supervisory approvals and its acceptance threshold. Approval of any resolution would end Intesa's bid but leave MPS chasing a Banco BPM whose largest shareholder has already declined. On current commitments, the more likely outcome is that Italy's biggest bank gets considerably bigger, and that the consolidation round reshaping Italian finance ends with a single dominant buyer rather than a third domestic champion.