(Bloomberg) — UniCredit SpA Chief Executive Officer Andrea Orcel indicated he’s open to sweetening the takeover bid he has made for domestic rival Banco BPM SpA.
The acquisition terms proposed by UniCredit are a “fair starting point,” although it’s “premature” to make a decision on a potential improvement, Orcel said in a Bloomberg Television interview on Tuesday in Davos. He also signaled he expects UniCredit’s share price to outperform Banco BPM’s, potentially making the all-share offer more attractive for investors in the smaller rival.
Orcel two months ago launched a surprise takeover effort for Banco BPM, offering 0.175 new UniCredit shares for each one in Banco BPM. The move took officials in Rome by surprise and it was rebuffed by Banco BPM’s leadership as too low.
Italy has been preparing to start a formal review of UniCredit’s unsolicited offer for Banco BPM, Bloomberg News reported earlier this month. The process under the government’s “Golden Power” rules could impose conditions should a deal be approved.
Orcel said he is optimistic he can sway Rome in his favor. The Golden Power assessment is a “structured” process that gives UniCredit “an opportunity to sit down” with the government and explain the deal, he said.
The shares exchange ratio proposed by UniCredit offered almost no premium on Banco BPM’s closing price before the bid. It currently implies a price for Banco BPM of about €11.6 billion ($11.8 billion), while the bank has a market capitalization of €12.5 billion, indicating that shareholders expect a higher offer to ultimately materialize.
Orcel said in the interview on Tuesday that the offered exchange ratio represented a premium of as much as 20% compared to where the bank was trading a month before the bid. He also said “there were rumors” that Banco BPM may not benefit from an accounting effect known as Danish Compromise in its bid for the Italian asset management firm Anima Holding SpA, which could undermine the proposed deal.
“We think we are significantly undervalued, and [Banco BPM] are probably fairly or overvalued,” Orcel said. “Let’s see how banks perform in Q1, in Q2, let’s see if Anima is done or not” before making any decision on whether or not to improve UniCredit’s offer for the smaller lender, he said.
“At the moment, we stand firm on our offer, and we think it’s appropriate,” Orcel said.
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