Written by Valentina Za
MILAN (Reuters) – UniCredit on Friday submitted its takeover bid for rival Banco BBM with the Italian market regulator, and CEO Andrea Ursel said the price was right.
The filing makes a 10 billion euro ($10.5 billion) all-share offer, which UniCredit Bank announced on November 25, binding and sets a minimum price. UniCredit has also applied to the relevant authorities for regulatory approval.
Banco BPM shares closed at 7,846 euros on Friday, well above the 6,657 euros per share that UniCredit is offering on an offer-to-offer ratio basis, suggesting investors are betting on the proposal improving.
“We consider our initial offer to Banco BPM shareholders to be fair and appropriate,” Orcel said in a statement.
Any deal must create value for shareholders and be higher than the return from any buyback of UniCredit shares, he said. Orcel, an M&A veteran, said he wants any deal to return at least 15%.
In announcing its bid for BPM, Orcel indicated that UniCredit could consider raising the amount in cash in the future.
“We are committed to our disciplined approach to all mergers and acquisitions, as any deal must demonstrate a strategic fit and meet or exceed our core financial metrics,” he said.
While BPM has long been a target of UniCredit, Orcel, who built his fortune as a bank merger adviser, has resisted buying BPM so far partly because of the M&A premium built into BPM's share price, sources previously told Reuters.
Accelerating local consolidation forced his hand.
Orcel said BPM investors would be better off holding UniCredit shares given their “much greater flexibility and diversification in a challenging year and a two-times higher total distribution yield.”
UniCredit is offering 175 newly issued shares for every 1,000 BPM shares, a premium of just 0.5% to the pre-offer BPM share price.
UniCredit says the terms are a 15% premium to BPM's share price ahead of BPM's bid to buy out fund manager Anima Holding on November 6, a move that led to gains in shares of both Anima and BPM.
“Given the strength of our approach, the premium on offer and the status quo that existed at the time of our original offer, we are moving forward on these terms,” Orcel said.
UniCredit also invited BPM's largest shareholder Credit Agricole (OTC:) (CA) to sit down for talks that are widely expected to focus on business partnerships.
CA cooperates with both BPM and UniCredit. To strengthen its negotiating position, CA applied to the ECB for a 19.99% stake in BPM and used financial derivatives to raise its stake in BPM to 15% from just under 10%.
“We are in ongoing discussions with all relevant stakeholders,” Orcel said.
($1 = 0.9528 euros)
