BPER CEO says Italy's M&A wave prompted defensive bid for Pop Sondrio

By Andrea Mandala and Valentina Za

MILAN (Reuters) -BPER Banca's CEO on Friday said its 4.3 billion euro ($4.5 billion) all-share takeover bid for smaller peer Banca Popolare di Sondrio was a defensive move prompted by a raft of merger proposals across Italy's banking industry.

Mid-sized Italian banks like BPER have long been seen as candidates for consolidation. Previously, BPER had explored a tie-up with Banco BPM but they never reached an accord. Banco BPM has now become a target for larger bank UniCredit.

Popolare di Sondrio's board is to meet in the coming days to consider the unsolicited bid proposal, a source close to the bank said.

BPER Chairman Fabio Cerchiai said the offer was not hostile, while CEO Gianni Franco Papa said BPER plans to keep Pop Sondrio's brand and cut jobs only through voluntary early retirement.

"The current consolidation phase hastened this transaction: it became imperative for us to defend our competitive position also in terms of size," Papa said.

Shares in BPER, Italy's fourth largest bank, plunged 7.7%, with analysts saying Pop Sondrio, whose shares rose 5%, was worth more in terms of valuation multiples.

"Delivering meaningful earnings per share accretion on this tie up is not an easy task," Jefferies said.

"However, there are strategic merits to the deal, with BPER acquiring exposure to attractive regions and increasing market share in an environment of rapid sector consolidation."

The combined entity will have a 14% market share in Lombardy, Italy's wealthiest region, double BPER's current share.

A tie-up would bring together two banks whose main shareholder is Unipol, Italy's second-largest insurer which has a near 20% equity stake in each lender.

Papa said Unipol had been consulted, and would now assess the financials of the deal.

UNIPOL

Unipol Chief Executive Carlo Cimbri has bet on commercial accords with banks to sell the insurer's products, buying stakes to secure the partnerships, and backing the expansion of BPER's branch footprint.

Given the shareholding structure, the bid would give BPER control with as little as 35% of Pop Sondrio plus one share.

BPER, based in the town of Modena, famous for its automakers, including Ferrari, cured meat products and balsamic vinegar, jumped in size in 2020 by buying 600 branches in the Intesa Sanpaolo-UBI merger. It then swallowed up Genoa-based rival Carige.

BPER is offering 29 new shares for every 20 Pop Sondrio shares tendered, a 7.8% premium based on Thursday's closing prices, Reuters' calculations showed.

The latest unsolicited bid in Italian banking follows state-backed Monte dei Paschi di Siena's (MPS) shock move on bigger rival Mediobanca.

The chain reaction was set in motion by Italy selling a stake in bailed-out MPS in November, which brought on board as shareholders Banco BPM and two Italian investors with large stakes in Mediobanca and insurer Generali.

The prospect of an eventual tie-up between Banco BPM and MPS prompted UniCredit's swoop on BPM. That left MPS, which has always been seen as in need of a partner and which had been looking at BPM, with no option but to bid for Mediobanca.

Unipol's Cimbri had offered to join forces with MPS, but Italy's conservative government spurned an offer that came from a camp traditionally close to left-wing politics in Italy.

($1 = 0.9639 euros)

(Reporting by Valentina Za and Andrea Mandala; Editing by Emelia Sithole-Matarise and Jane Merriman)