Monte dei Paschi CEO Luigi Lovaglio isn’t backing down from his audacious €13.3 billion bid for Mediobanca, despite the market’s epic eye-roll. His offer of 23 MPS shares for 10 Mediobanca shares sent MPS stock tumbling 4% while Mediobanca jumped 6.5%. Mediobanca’s board unanimously rejected the deal, citing zero merit, but Lovaglio remains stubbornly optimistic, promising €700 million in synergies. The drama behind this banking power couple’s potential marriage is just getting started.
Monte dei Paschi CEO Luigi Lovaglio stood his ground Thursday, defending the bank’s ambitious €13.3 billion takeover bid for Mediobanca despite a swift and brutal rejection.
The deal, which offered 23 MPS shares for every 10 Mediobanca shares, landed with all the grace of a brick through a window. Markets weren’t impressed either – MPS shares tumbled 4% while Mediobanca’s stock jumped 6.5%, suggesting investors thought Mediobanca was getting the better end of the stick.
Deputy Prime Minister Antonio Tajani has expressed that the merger would lead to stronger Italian banks.
Lovaglio, ever the optimist, keeps insisting the merger makes perfect sense. He’s promising €700 million in annual pre-tax synergies, plus a sweet €500 million yearly tax credit for six years, thanks to MPS’s past losses. Not bad for a bank whose market cap of €8.8 billion is trying to swallow a bigger fish worth €12.7 billion.
A smaller bank chasing a bigger prize, with Lovaglio dangling billion-euro carrots despite the obvious mismatch in size.
But Mediobanca’s board wasn’t buying what Lovaglio was selling. They unanimously shot down the proposal faster than you can say “hostile takeover,” claiming it lacked both financial and industrial merit. The fact that MPS wanted to delist Mediobanca from the Milan stock exchange probably didn’t help matters. Similar to how investment diversification helps reduce financial risk, the merger could have strengthened both institutions.
The proposed deal valued Mediobanca shares at €15.99 each – a measly 5% premium that had market watchers rolling their eyes. Sure, the merger could reshape Italy’s banking landscape, but analysts are worried about everything from execution risks to cultural differences between the two institutions.
Lovaglio keeps preaching about respecting Mediobanca’s brand and preserving its investment banking prowess. He’s painting a rosy picture of operational synergies and long-term growth that would supposedly help both banks compete in Europe’s consolidating banking sector. The bank’s remarkable recovery is evident as MPS shares have tripled in value since November 2022.
But with Mediobanca’s flat-out rejection and the market’s skeptical response, Lovaglio’s vision of a banking power couple seems about as likely as finding a bargain at a luxury boutique.
Still, he’s not backing down. Sometimes you’ve got to admire that kind of determination – even when it looks like you’re trying to catch smoke with a butterfly net.
