Monday, May 21, 2007

Italian Banks "Unicredit" and "Capitalia" Merge to Create Europe's 2nd Largest Bank

The ANNOTICO Report

 

Unicredit, about four times the size of Capitalia will be the surviving Company with a total worth $ 135 Billion.

 

Conditions have been ripe for consolidation of Italian banks since Mario Draghi, the governor of the Bank of Italy last year threw out rules requiring lenders to notify the government in advance of mergers. His predecessor, Antonio Fazio, stepped down from the lifetime job after a he was accused of protectionist policies.

 

Other Italian banks have been teaming up with each other recently, with Banco Popolare di Verona e Novara having paid $10 billion for rival Banca Popolare Italiana last year.

Antiquated bylaws and shareholders' pacts have made it difficult for foreign banks to acquire Italian lenders, but a new wave of consolidation in the sector, sparked by the ABN Amro merger talks, could start pry things open. That would explain why some Italian banks may be compelled to team up with each other sooner rather than later.

 

 

 

Market Scan


Italy Creates Europe's Second Biggest Bank

 

Forbes

Parmy Olson,

May 21, 2007

LONDON -

Italian banks Unicredit and Capitalia have agreed on an all-stock takeover deal that will create Europe's second biggest bank and which will further protect the country's lucrative banking market from foreign bidders.

Unicredit is offering 1.12 ordinary shares for each Capitalia share, the banks said. Capitalia is worth $27 billion, and on Monday afternoon was trading 13 euro cents (17 cents), or 1.6%, lower at 7.84 euros ($10.55) in Milan. The combined value of the two banks will be around 100 billion euros ($135 billion), second only behing HSBC Holdings .

The offer represents a premium of 17% and 18% to Capitalia stocks average in the last three and six months respectively. Unicredit will issue 2.9 billion shares, equivalent to 28% of outstanding ordinary and saving shares.

The deal is still subject to shareholder agreement, and will be presented at the banks' extraordinary shareholders meetings at either the end of July or beginning of August.

The deal comes just as consolidation in the European banking sector has reached new heights, with Barclays and ABN Amro still working out the details of their agreed merger while they face the prospects of a hostile bid for ABN from a consortium of banks including Royal Bank of Scotland, Spain's Banco Santander Central Hispano, and the Belgian-Dutch bank Fortis.

That deal could incidentally be impacted by the Unicredit takeover, since Capitalia is 7.7% owned by ABN Amro, and could have been seen as a spring board for the Dutch bank's suitor's into the profitable Italian banking market.

Italian banks look attractive to corporate suitors because consumer lending there is expensive compared to other European banking markets.

Unicredit and Capitalia expect to get rapid regulatory clearance of their planned merger with management having received a commitment from the various regulatory authorities according to Sunday's Il Sole 24 Ore.

The two banks are seeking to expedite the merger to head off a possible counter bid on Capitalia by banks currently involved in the bidding process for ABN Amro, the 'Sole said.

Speculation that a foreign buyer was on the prowl may have been heightened last March when it was revealed that Deutsche Bank'sunit trust, DWS Institutional, was holding a 2.07% stake in Capitalia. (See: "Capitalia Next On The Block?")

Lehman Brothers analyst Paola Biraschi said that given the domestic nature of the deal, "we expect Unicredito to deliver a smooth and relatively rapid integration of Capitalia." The banks expect the transaction be completed at the start of the last quarter of this year.

Conditions have been ripe for consolidation of Italian banks since Mario Draghi, the governor of the Bank of Italy last year thr ew out rules requiring lenders to notify the government in advance of mergers. His predecessor, Antonio Fazio, stepped down from the lifetime job after a he was accused of protectionist policies. (See: "Fazio Quits As Italian Central Bank Chief")

In March the European Union announced new rules to try to prevent any erstwhile political meddling in mergers and acquisitions in the banking sector. (See: "EU Makes Bank Mergers Easier") The new guidelines set a shorter deadline of 60 days for regulators to consider a bid, and common standards with which to measure the financial soundness of potential bidders.

But those rules won't take effect until 2009, and they already appear to have rung hollow in Italy since the country's Premier Romano Prodi last week welcomed the banks' confirmation of their union, saying it was crucial for Italy's efforts to keep pace during a time of increasing globalization.

That's in stark contrast to the political opposition that has been unleashed on cross border mergers in Italy, most recently illustrated by the negative reaction to AT&T's attempt to buy Telecom Italia earlier this year.

Other Italian banks have been teaming up with each other recently, with Banco Popolare di Verona e Novara having paid $10 billion for rival Banca Popolare Italiana last year. (See: "Conso lidation In Overbanked Italy")

Antiquated bylaws and shareholders' pacts have made it difficult for foreign banks to acquire Italian lenders, but a new wave of consolidation in the sector, sparked by the ABN Amro merger talks, could start pry things open. That would explain why some Italian banks may be compelled to team up with each other sooner rather than later.

http://www.forbes.com/markets/2007/05/21/

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cx_po_0521markets07.html

 

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