Mediobanca Offers to Buy Banca Generali in $7 Billion

Source Credit : The Wall Street Journal

Mediobanca is offering to buy Banca Generali for 6.3 billion euros ($7.16 billion), marking the latest twist in a wave of consolidation sweeping through Italy’s crowded banking market.

The Italian lender on Monday launched a bid for the private bank, which is majority-owned by Assicurazioni Generali , to bolster its wealth management operations. It is offering 54.17 euros a share, which represents an 11% premium to Banca Generali’s closing price on Friday.

Mediobanca intends to pay for the deal by selling its 13% stake in the insurer, in which it was its top shareholder. “Through this large-scale reallocation of capital to [wealth management], the combination will transform the relationship between Mediobanca and [Assicurazioni Generali] from a financial investment to a strong industrial partnership,” it said.

The bank expects the proposed merger to lead to around 300 million euros in synergies, increasing its return on tangible equity to more than 20% from 14%.

The offer adds to a growing list of bids that are pervading the Italian banking sector. Mediobanca is itself a takeover target and is trying to fend off a bid from Banca Monte dei Paschi di Siena, while UniCredit is pursuing an acquisition of smaller rival Banco BPM, which also rebuffed the approach and is in the process of buying asset manager Anima Holding. Smaller Italian lenders have also launched offers in a bid to gain scale and defend their market position.

Mediobanca will host a shareholder meeting on June 16 and expects the exchange offer to be completed by the end of October.