Well, it could not have gone down worse. Banca Monte dei Paschi di Siena, which caters to Italy’s well-heeled and claims to be the oldest bank in the world, said on Thursday that it had agreed to buy its local rival, Banca Antonveneta, from Spain’s Santander for €9bn.
Shares in MPS, as it is known, were suspended for the rest of the day - and while trading resumed on Friday, the stock had to be re-suspended as the price plunged. Once market order was restored in Milan, the price settled about 10 per cent lower, valuing this 535 year-old institution itself at just over €9bn.
Much of the damage seems to have been done by its counterparty, Santander, which gleefully told the world that it only valued Antonveneta - just acquired as part of ABN Amro - at €6.6bn - and that internal valuation included its Interbanca merchant banking business, which the Spanish are hanging on to for now.
Cue a string of analysts downgrades, such as this from Marcello Zanardo at Keefe, Bruyette & Woods:
Whilst the deal makes strategic sense, the high valuation, the lower capital base, the uncertain macro picture and execution risk are behind our downgrade…We expect a significant share price correction for BMPS at the opening today.
The takeover is expected to be seriously dilutive (18 per cent year one, 6 per cent year two) and MPS’s forecasts on synergies and future profitability are being dismissed as overly optimistic.
But the bank’s investors cannot really claim to be surprised by all this. MPS and its chairman, Giuseppe Mussari, have been showing erratic tendencies for a good number of weeks. Just a fortnight ago Mussari casually dropped the news that his bank had tabled a bid for another of its smaller rivals Banca Marcha.
And back at the end of August the controlling shareholder in MPS, the Fondazione Monte dei Paschi di Siena, was reported to have shown an interest in buying a piece of the London Stock Exchange.
