Banco BPM has proposed a merger of “equals” with Banca Monte dei Paschi di Siena Spa that would create Italy’s second-largest banking group, with a market value of more than €50bn.
The lender said its board unanimously approved sending a letter to Monte Paschi expressing interest in opening talks on a negotiated combination, according to a statement on Sunday from Banco BPM.
The Milan-based bank didn’t disclose any exchange ratio or financial terms for the proposed tie-up. A representative for Monte Paschi said the bank will not comment before the board meets to review the proposal. Italy government officials have been silent on the proposal so far.
The proposal is the latest twist in a two-year consolidation wave that’s reshaped Italy’s banking industry, as lenders seek greater scale to boost profitability.
The sector has been at the center of an intense round of deal-making with Monte Paschi taking over larger rival Mediobanca SpA, Banco BPM acquiring asset manager Anima Holding Spa, and UniCredit SpA unsuccessfully attempting to buy Banco BPM while also pursuing Germany’s Commerzbank AG.
Banco BPM is already a shareholder in Monte Paschi, with a stake of about 3.7%. The lender voted in favor of Chief Executive Officer Luigi Lovaglio’s reappointment at Monte Paschi’s shareholder meeting earlier this year, a move viewed by investors as a sign of support for the Siena-based bank’s management and strategy.
The vote also fueled speculation about closer ties between the two lenders as consolidation pressures intensified across the industry. The proposed deal would generate more than €1.1bn ($1.3bn) of pretax synergies, including over €650mn of cost savings and more than €450mn of revenue synergies, according to Banco BPM. It said execution risk would be limited given the complementary geographic footprints and business operations of the two lenders.
Banco BPM also said the transaction would fit alongside Monte Paschi’s ongoing integration of Mediobanca, allowing for the coordinated development of the combined group’s product factories.