Banca Monte dei Paschi di Siena SpA’s plan to fend off an unsolicited takeover from Intesa Sanpaolo SpA by launching two parallel deals of its own suffered a severe setback after its second-biggest shareholder refused to back it.
Billionaire Francesco Gaetano Caltagirone, the No. 2 investor in Monte Paschi, said on Thursday he doesn’t support a plan to bid for Banco BPM SpA and Banca Generali SpA. Caltagirone joins Delfin Sarl, the largest shareholder, in opposing the deals, which Chief Executive Officer Luigi Lovaglio had proposed in the wake of Intesa’s approach as a strategic alternative.
The two investors, along with a third shareholder who has come out against, own just under one-third of Monte Paschi’s shares — the threshold required to foil the CEO’s proposal.
Their opposition marks a significant step forward for Intesa CEO Carlo Messina, 64, who wants to expand Intesa’s already dominant position in its home market with a takeover of Paschi. Intesa raised the stakes earlier this month by improving its offer while making it conditional on investors rejecting Lovaglio’s counter proposal.
Read More: Intesa Edges Closer to Paschi Deal After Swaying Key Investor
Shares of Monte Paschi fell as much as 6.1% and were trading 2.7% lower at 10:57 a.m. in Milan. Intesa declined 2.2%.
Caltagirone plans to vote against resolutions needed to pursue Lovaglio’s plan at a Monte Paschi shareholder meeting on Oct. 29. The board of the billionaire’s holding company took an unanimous decision to reject all five items on the agenda at the meeting, it said in a statement.
Edizione, the Benetton family holding company, which has a stake of about 1.5% stake in Paschi, also said it intends to participate in Intesa’s offer.
Lovaglio needs the backing of two thirds of the votes cast at the shareholder meeting to keep his proposal alive. Caltagirone raised his holding in Monte Paschi to about 13.5% earlier this year, Bloomberg News has reported. Together with Delfin’s roughly 17.5% stake and the Benetton family’s holding company, the three investors account for more than 32% of the lender’s capital.
While that makes it unlikely that Lovaglio will succeed, the CEO has surprised investors before. Last year, he pulled off the acquisition of larger rival Mediobanca, helped by backing from his biggest investors — Delfin, Caltagirone and the government in Rome.
What Bloomberg Intelligence Says
Caltagirone’s rejection of Monte Paschi’s proposed Banco BPM and Banca Generali deals likely removes the bank’s main defense of independence. The major shareholder’s opposition takes declared resistance to the board above 32%, while largest shareholder Delfin has committed its stake to Intesa’s takeover offer. That leaves Intesa’s sweetened bid as the valuation anchor and increases the likelihood of a takeover. The shareholder split could also delay Mediobanca integration and weaken CEO Luigi Lovaglio’s mandate.
-Lento Tang, senior industry analyst
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In April, Lovaglio won a power struggle with his own board, which has ousted him with the backing of Caltagirone. The billionaire had disagreed with the CEO over whether to keep Mediobanca listed on the stock exchange and how to manage its stake in Assicurazioni Generali SpA, Italy’s largest insurer. Delfin at the time backed Lovaglio, according to people familiar with the matter.
This time, Delfin has said it backs Intesa’s offer, while the government has said it doesn’t plan to play an active role. Intesa has said it plans to sell half of the Monte Paschi’s branches to address potential antitrust concerns, should its bid succeed. While Monte Paschi’s board hasn’t formally rejected the offer, it has questioned that plan.