Why did Mediobanca reject Monte dei Paschi’s €13 billion takeover bid?
Italian bank Mediobanca (BIT: MB) is in focus this morning after its shareholders voted to reject Banca Monte dei Paschi’s (BIT: BMPS) €13 billion takeover proposal, citing a lack of “industrial and financial rationale.”
The investment bank went on to call the peer’s offer “destructive” as it compromised its identity and business profile.
Choosing to come together with Monte dei Paschi would not have been in the best interest of our shareholders since it could have led to a “significant” loss of wealth management and investment banking customers, argued Mediobanca in a statement on Tuesday.
Mediobanca stock is down about 5% today.
Mediobanca and BMPS did not have clear synergies
Monte dei Paschi – the world’s oldest bank last week offered to takeover Mediobanca in a deal that valued each share of the latter at €15.99.
Its takeover proposal translated to about a 5% premium on MB’s previous close.
The bank’s decision to reject a merger with MPS today is not entirely surprising since the potential synergies between the two companies were not immediately clear to some analysts as well.
“The complementarity, the value creation drivers, and in general, MPS strategy on MB are not yet clear,” experts at Barclays told clients in a research note on Friday.
Shares of Monte dei Paschi are also in the red at writing.
Why else did MB reject Monte dei Paschi’s offer?
Mediobanca decided against a merger also because Francesco Gaetano Caltagirone and Delfin, two of its major investors, hold sizable stakes in Monte dei Paschi as well as Assicurazioni Generali.
Their exposure to the potential suitor and the insurance giant, it was concerned, could create a “potential misalignment of interests relative to other shareholders” as it relates to the takeover bid.
The Monte dei Paschi news arrives months after Mediobanca reported €330 million in net profit on €865 million of revenue for the quarter ended September 30th.
Mediobanca stock currently pays a solid dividend yield of 6.78% which makes it more attractive to own for income investors.
Should you invest in Mediobanca stock?
In a related development, Citi analysts downgraded Mediobanca stock following the tender offer from Monte dei Paschi last week.
Regardless of whether the proposal is accepted, the uncertainty surrounding the company’s future direction makes its share too risky to own, they added in a research note.
Despite operational and financial challenges, the investment firm slightly pushed its price target on Mediobanca to €6.35.
A merger with Monte dei Paschi could have been 13% accretive to the bank’s per-share earnings by 2027 but at a cost of a potential 30% dilution of its tangible book value, according to Citi.
Mediobanca stock has rallied more than 35% in the trailing 12 months.
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