Mediobanca's takeover defence thwarted as shareholders reject Banca Generali deal

By Elvira Pollina and Andrea Mandala

MILAN (Reuters) -Mediobanca shareholders rejected a plan to buy Banca Generali on Thursday, dealing a blow to the Italian merchant bank's attempts to thwart a hostile takeover by state-backed Monte dei Paschi di Siena (MPS).

The bid battles are among a series of deals which have been reshaping Italy's banking landscape as companies look for scale.

Mediobanca had pitched the Banca Generali plan, which would have created Italy's second-largest wealth manager, as an alternative to the MPS takeover.

The higher share price multiples which wealth managers such as Banca Generali attract, could have lifted Mediobanca's valuation, helping make it less palatable as prey.

Opposition to the plan was led by Mediobanca's two main investors, Italy's billionaire Del Vecchio and Caltagirone families, who together hold nearly 30% of its capital, and have long been at loggerheads with CEO Alberto Nagel.

The families are also leading shareholders in MPS and are backing its 17 billion euro ($19.7 billion) bid for Mediobanca which runs until September 8.

The takeover of Mediobanca, a former lynchpin of Italian capitalism now active in wealth management, by MPS has the blessing of Italy's government which believes the combination will create a strong rival to market leaders Intesa Sanpaolo and UniCredit.

MPS CEO Luigi Lovaglio said last month a deal would be a springboard to allow the Tuscan bank to take part in a second round of consolidation he sees taking place in a couple of years.

UniCredit's withdrawal last month from bidding for Italy's third largest lender Banco BPM opens up another possibility.

A merger between MPS and Italy's third largest lender Banco BPM has long been favoured by the Italian Treasury.

NAGEL RUES 'MISSED OPPORTUNITY'

Seeking to ward off MPS, Nagel proposed a 6.8 billion euro ($7.9 billion) deal in April to buy Banca Generali, which is owned by Italy's biggest insurer Generali. Generali's key investors are Mediobanca, the Del Vecchios and the Caltagirones.

After Thursday's vote in which 35% of shareholders backed the deal, failing to pass the required threshold of 50%, Mediobanca declared its bid had lapsed. Nagel lamented the impact of the complex web of cross-ownerships on the outcome.

"This is clearly an opportunity, for now, missed for the development of our bank and the Italian financial system," Nagel, who has led Mediobanca since 2008, said in a statement.

He added that it was down in part to "shareholders who also expressed a clear conflict of interest in their engagement activities, putting (their interests) relating to other Italian situations/assets before those of Mediobanca shareholders."

Delfin, the holding company of the late Ray-Ban billionaire Leonardo Del Vecchio, declined to comment. However, a source close to the holding company said that "the vote was an expression of concerns about the unusual methods and timing of the transaction rather than its strategic rationale".

A spokesperson for the Caltagirone family did not immediately respond to a request for comment.

Under Italian takeover rules, Mediobanca needed shareholder backing for the Banca Generali deal due to the MPS bid, which would have become more costly if Mediobanca had bought Banca Generali.

In Thursday's vote, 78% of Mediobanca's share capital was represented. Shareholders with 42% voted against or abstained, including the Caltagirones and Del Vecchios.

($1 = 0.8600 euros)

(Writing by Keith Weir and Andrea Mandala. Editing by Gavin Jones, Mark Potter and Elaine Hardcastle)