Italy's UBI Banca rejects takeover bid from rival Intesa

Milan

UBI Banca last Friday rejected a takeover bid by rival Intesa Sanpaolo as inadequate and risky for its shareholders, while pledging to boost dividends despite cutting profit forecasts.

Intesa is due to launch an all-paper offer on Monday to buy UBI and drive earnings through cost cuts at a time when the Covid-19 pandemic is set to erode already feeble returns in the banking industry.

UBI CEO Victor Massiah vowed to speed up the search for an alternative, friendly merger and acquisition (M&A) option if UBI remained independent.

Intesa is offering 1.7 new Intesa shares for each UBI share, a ratio which UBI's board said would penalise its shareholders versus Intesa's current investors.

Italy's second biggest bank made its takeover proposal in February, potentially kicking off long-awaited Italian bank consolidation.

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"By not including a cash component, the offer leaves UBI shareholders exposed to the risks that the transaction's strategic goals may not be reached," UBI said.

It added such goals were uncertain, given a lack of detail and the fact that asset disposals in the past have helped Intesa sustain its generous dividend policy.

Intesa CEO Carlo Messina said in a note the decision was in the hands of UBI shareholders, adding that some of them were already supporting a merger that would help the local economy.

Intesa is betting on the prospect of higher returns winning over investors, and most analysts recommend that UBI shareholders should tender their stock.

UBI shares trade in line with the exchange ratio, indicating the market expects the deal to go through.

But a group of local UBI shareholders oppose the bid, which may limit take-up and make it harder for Intesa to succeed.

The offer is valid if accepted by 50 per cent of UBI's capital plus one share. A 66.7 per cent take-up would ensure control of extraordinary shareholder resolutions regardless of attendance.

UBI says the deal only aims to take out a competitor and would create an "anomaly" in Europe by giving Intesa a dominant domestic position not seen in other countries.

Before rejecting the offer, UBI on Friday updated a three-year business plan originally released on Feb 17, just hours before Intesa announced the bid and a few days before coronavirus contagion hit Italy.

UBI cut its 2022 net profit estimate to 562 million euros (S$882 million), from 665 million, after raising estimated loan losses under the plan by more than 700 million euros due to Covid-19.

To respond to Intesa's offer of higher payouts, UBI said asset sales could help it to distribute to shareholders around 840 million euros in excess capital while keeping its CET1 ratio above 12.5 per cent.

"We have hidden treasures on our balance sheet," Mr Massiah said. REUTERS