Mega-bids turn the Italian banks industry upside-down

ITALY'S BANKING sector was turned upside down last night after Milan bank UniCredito launched a $16.4bn (pounds 10bn) share swap offer for smaller rival Banca Commerciale Italiana (BCI) and rivals San Paolo-IMI agreed an even bigger share swap deal with Banca di Roma.

The board of UniCredito announced the offer of eight UniCredito shares for every five BCI shares at a price 17 per cent above Friday's market close. The offer is conditional on acceptance by at least 50 per cent of BCI shareholders and the abolition of a clause that limits the voting rights of any BCI shareholder to 5 per cent.

The resulting colossus, which would be named Eurobanca, would have become Italy's biggest bank - and the fifth-largest in Europe in terms of assets, totalling 500 trillion lire (pounds 175bn) - but for the fact that within hours of its announcement, San Paolo-IMI of Turin and Banca di Roma agreed their own merger, which would itself create a bank with assets of 555 trillion lire (pounds 193bn).

If both mergers succeed, Italy will have two banks with the financial strength to compete in the euro zone.

UniCredito, itself the result of a previous merger, said the cost savings that would result from a takeover of BCI would enable it to achieve a return on equity of 23 per cent by 2002. BCI was until last week in merger talks with Banca di Roma.

The main victim of what is being described as an earthquake in Italy's rigid banking system looks likely to be the ageing puppetmaster of Italian finance, Enrico Cuccia, 93. Mr Cuccia, the more-than-honorary president of Mediobanca, held intense consultations on Saturday at the bank's 16th- century Milan palazzo Milan "to decide on a last-ditch defence or an honourable retreat".

The two mergers would mean that 16 per cent of the capital of Mediobanca would be in the hands of Eurobanca and 8 per cent in San Paolo-Banca di Roma - nearly a quarter of its wealth would no longer be in friendly hands. This would at best undermine Mediobanca's autonomy, and at worst leave it vulnerable to the same companies and banks it has in the past influenced.

The manoeuvres would also bring a greater foreign presence to the sector; Deutsche Bank, Commerzbank and Paribas in UniCredito-BCI, and ABN Amro and Banco di Santander in the San Paolo union.

Overseas institutions are unlikely to play the game Mr Cuccia's way. For decades, this reclusive and brilliant man has had the last say in almost every major industrial or financial operation on Italian soil.

Mr Cuccia's strategy when he founded Mediobanca was simple; he created alliances with the major families of Italian capitalism, from the Agnellis to the Pirellis, and helped them maintain their power, preferably without calling on share issues or bank loans.

He did this through a subtle web of cross-shareholdings between companies and banks that were members of the exclusive Mediobanca club. At times of crisis all could be counted on to vote as a block, and if one was in difficulty the others would help out. Critics say Mediobanca thwarted growth in the entire financial sector.

Analysts say the introduction of the euro, deregulation and the privatisation of many state controlled banks mean a more competitive environment is inevitable, but Mediobanca has failed to adapt its strategy. Mr Cuccia's close relationship with Lazard Freres and the Agnelli family - two key planets in the Mediobanca constellation - have become strained. Indeed car maker Fiat, controlled by the Agnelli family, was instrumental in setting up the San Paolo-Banca di Roma deal.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific