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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Italian financiers rarely opt for a simple plan where a complicated one would do. That shows in a five-way pile-up taking shape between the country’s banks and insurers. It’s a power struggle that offers crumbs to the companies’ regular shareholders.
The tangle looks thus. Large lender UniCredit has bid for Banca Popolare di Milano — derailing a potential merger between BPM and Tuscan lender Monte dei Paschi di Siena. That bank, in turn, launched a hostile bid for Mediobanca, whose key asset is a 13 per cent stake in insurer Generali. And in a weekend colpo di scena, UniCredit unveiled a 4 per cent stake in Generali.
All of this may sound confusing. It stems, though, from two long-standing — and not especially complex — strategic challenges in Italy’s financial landscape.
The first is that its banking system remains fragmented, with two larger groups — Intesa and UniCredit — and a number of smaller banks that will need to consolidate. The second is that Generali, one of the country’s prize assets, has not participated in consolidation and lost scale relative to its rivals. Detractors argue Mediobanca’s influence has held it back.
Both of these issues have long needed bringing to the table. The trouble is, it looks like spaghetti is on the menu.
In terms of bank consolidation, the potential combinations on offer help, but only partly. While UniCredit’s bid for BPM does have obvious potential synergies, Monte dei Paschi and Mediobanca is less of a natural combination. There is limited business overlap and the Tuscan lender relies in part on a more rapid use of deferred tax assets to create value.
Over at Generali, meanwhile, the stage has been set for a struggle for control which looks likely to descend into a bunfight, as opposed to a bid with a fulsome control premium.
Much of the frenzy has been sparked by Italian tycoon Francesco Gaetano Caltagirone and Delfin, the Del Vecchio family’s holding company, who have in the past tried and failed to install their own candidates at Generali.
When the insurer’s shareholders pick a new board next May, the two will have tanks on everyone’s lawn. Together they own a direct 17 per cent stake in Generali. Alongside the Italian government, they are both significant shareholders in Monte dei Paschi, which has Mediobanca’s 13 per cent stake in Generali in its sights. They may be hoping that UniCredit — which now has a chance to play kingmaker — could come down on their side.
There are plenty of questions that arise. Who will own whom when the dust settles? Who will control Generali, and will it be any better as a result? But it is hard to escape the feeling that an opportunity for simplification has been missed. The new world of Italian finance may be just as convoluted as the old.
