Banking Giant Aims to Increase Its Hold in Rival Bank to 30% for a Potential Acquisition
A prominent banking institution is making moves to expand its hold in another bank to over 30%. This significant percentage is a regulatory requirement if the bank intends to make a full acquisition bid. The bank, based in Milan, currently has a 28% stake in the other bank, which consists of about 26.04% in shares and the rest in total return swaps.
Details of the Proposed Deal
The anticipated deal is speculated to feature an exchange ratio of 0.485 shares of the Milan-based bank for each share of the rival bank. This implies a 30.80 euro price per share of the other bank, or a 4% premium.
The CEO of the Milan-based bank shared that, as per German takeover regulations, acquiring more than 30% of the shares would enable it to buy more shares of the rival bank on the open market. However, the rival bank is against this move, stating that the offer does not add value for its shareholders. Instead, the bank emphasized its focus on "independence and profitable growth."
Potential Bid and Future Expectations
The Milan-based bank has been contemplating a potential bid for the Frankfurt-based lender since acquiring a 9% stake in 2024. According to German takeover regulations, a 30% stake necessitates a mandatory offer for the remaining shares. The bank's bid is strategically designed to surpass this 30% requirement without gaining complete control.
The CEO also expressed that he does not foresee the stake significantly surpassing 30%. Acquiring complete control by increasing its stake to 100% would consume 200 basis points of the bank's capital, he added. He further mentioned that the chances of a full takeover scenario are quite slim.
Market Fluctuations and Shareholder Concerns
It's worth noting that the rival bank's share price has experienced a drop of over 18% since the beginning of the year, while the shares of the Milan-based bank have declined by 10.5%. This price drop could potentially influence the feasibility of a merger deal, which was previously deemed too expensive due to the rival bank's high share price.
The Frankfurt-based bank expressed that the announcement from the Milan-based bank lacks crucial details regarding the key terms of a value-creating transaction. These details, they argue, are a necessary foundation for potential discussions. The CEO of the rival bank stressed that their top priority is to generate sustainable value for its shareholders.
Government and Shareholder Resistance
The German government, which holds the second-largest share in the rival bank with about 12.72% of shares, is reportedly resistant to any merger. The leading Social Democratic Party is firmly opposed, as per local media. Furthermore, the rival bank's third largest shareholder, with a 5.73% stake, and another investment management entity holding 3.14%, could also play significant roles in the merger.
Next Steps
The offer is expected to be officially launched at the beginning of May, with the Milan-based bank planning to hold an Extraordinary General Meeting to seek authorization for the related capital increase.