Monte dei Paschi Aims for 35% Stake in Mediobanca for Control

By Valentina Za

MILAN (Reuters) -Italian state-backed bank Monte dei Paschi di Siena has said securing at least 35% of Mediobanca's capital under its buyout offer would be sufficient to control its target.

That boosts the bid's chances of success given Monte dei Paschi (MPS) is expected to be able to count on the support of two leading Mediobanca shareholders owning a combined 27% stake.

Some other smaller Mediobanca investors have said they would tender their shares if MPS improved the all-share bid.

In a newspaper interview on Friday, MPS CEO Luigi Lovaglio said the price was fair and expressed confidence the bank would reach the 66.7% take-up that the offer is currently subject to.

The bid runs from July 14 to September 8 and MPS can waive the two-thirds condition to ensure the offer succeeds even with a lower take-up. It can also add a cash top-up to fill the discount to market prices currently equal to 4%.

In the investor document published late on Thursday detailing the terms of the hostile bid, MPS said for the first time that it did not necessarily have to reach two-thirds of its target's capital.

"The purchase of a shareholding between 35% and 50% of Mediobanca's voting share capital would enable MPS to obtain de facto control, by exercising a dominant influence at the ordinary shareholders' meeting of Mediobanca and impacting the general course of management," it said.

The European Central Bank last week cleared the offer, asking MPS to submit within three months a report explaining how it exercises control over Mediobanca with less than 50% of its capital.

MPS said in the document that in such a case it would not be able to tap 1.3 billion euros of tax credits it can use to boost profits if the bid's take-up tops 50%.

It would still benefit from tax credits but over a longer period of time stretching to 2036, because it would use 300 million euros a year instead of 500 million.

MPS was rescued by the state in 2017 after a decade at the centre of Italy's slow-moving banking crisis. It has since been restructured, returning to profit.

After failing to sell the Siena-based bank to UniCredit in 2021, the government has decided to use MPS' privatisation to create a third large bank in the country alongside Intesa Sanpaolo and UniCredit.

UniCredit's bid for smaller rival Banco BPM in November deprived MPS of the Italian government's preferred merger partner, triggering the surprise bid for larger rival Mediobanca in January.

Numerous other takeover offers have since followed as Italy's banking sector consolidates to brace for slowing profits.

(Additional reporting by Alvise Armellini in Rome. Editing by Gavin Jones and Mark Potter)