Reported by Bankinter
Intesa Sanpaolo (ISP) is offering a share swap of 1.6 ISP shares for every MPS share with a cash payment of €1 per share, subject to the acquisition of 66.67% of the share capital of MPS.
The offer values MPS at €10.09 per share, implying a premium of 12.5% over Friday’s closing price and 17.4% over the average share price over the last three months. This is not a high premium, but it should be noted that MPS has gained over 21% in the last three months (compared to 6.7% for ISP).
Bankinter research team’s view: This is a pre-emptive move to consolidate leadership in Italy ahead of a possible merger between MPS and BPM. The initial impact will be positive for MPS, whose shareholders would receive a control premium, and negative for ISP (negative impact on capital).
We believe the initial hit on ISP will be temporary because: (1) The deal makes strategic and financial sense. ISP estimates it will achieve synergies of ~€2.9 billion/year, with a return on equity (RoE) >20%. In this scenario, ISP could improve EPS by +8% from the third year onwards, and (2) ISP is a more efficient and profitable entity than MPS, so the integration of the two carries a low execution risk with a comfortable capital ratio (>14% estimated in 2029).
