Banking giant UniCredit enhances its forecast following the termination of its acquisition bid for Banco BPM.
In a significant turn of events, Italian banking giant UniCredit has announced the withdrawal of its €10.1 billion acquisition offer for Banco BPM. The decision comes after months of negotiations were hindered by the Italian government's application of the "golden power" provision, which created significant uncertainty and procedural obstacles.
The golden power rule, designed to protect national interests, allows the government to intervene in or block market transactions deemed sensitive. In this case, Banco BPM's management requested the government's application of this provision, effectively halting the normal negotiation process between UniCredit and Banco BPM shareholders during the offer period.
This intervention prevented normal shareholder dialogue during the takeover process and delayed resolution beyond the offer's deadline. UniCredit cited the "continued uncertainty" caused by the golden power provision as the reason for dropping its bid.
The golden power in this case was notable because it was applied to a domestic financial transaction between two Italian banks, which is unusual. Generally, golden power is intended to prevent foreign interference in strategic sectors, but here it was used to impose conditions or restrict a purely domestic deal. Other recent Italian bank consolidations involving foreign shareholders were not blocked by golden power, making the UniCredit-Banco BPM case a unique departure.
Consob, Italy’s financial market regulator, also suspended UniCredit’s takeover bid for 30 days to await further clarity from the government about golden power’s application, further delaying the process.
The Italian government's plans to create a third banking group in Italy, comprising Banco BPM and Monte dei Paschi di Siena, were thwarted by UniCredit's withdrawal. The European Commission had previously warned Italy that the golden power provision was in potential violation of EU law.
Despite the setback, UniCredit reported a strong second quarter performance. Excluding one-off items, UniCredit's net profit stood at 2.9 billion euros, up 8%. The bank also boosted its net income outlook for 2025 to 10.5 billion euros, above its earlier expectation of 9.3 billion euros.
UniCredit's shares rose by 2.5% to 59.54 euros after the announcement, while Banco BPM's shares fell by 4.27% to 9.88 euros. UniCredit has announced a 3.6 billion euros share buy-back plan "as soon as practicable".
This incident underscores the potential impact of the golden power rule in restricting deals and the associated regulatory uncertainty hindering the normal acquisition process. It also highlights the complexities involved in domestic bank mergers and acquisitions, particularly when national security concerns come into play.
The golden power rule, originally designed to safeguard national interests, was applied to a domestic financial transaction between two Italian banks, UniCredit and Banco BPM, creating a hindrance in the negotiation process. This unexpected use of golden power jeopardized the potential health of the epaper sector, as UniCredit's withdrawal of its acquisition offer for Banco BPM could have implications for future business deals and consolidations in the finance industry.
