Banco BPM: The two reasons that stopped Orcel. And the French "bill."

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Andrea Orcel , head of Unicredit , had said this, moving towards Banco BPM because he had a hunch that the French company Crédit Agricole was moving towards the same prey. As of November last year, they already had a 9.9% stake in the former Italian popular bank.

Buy on rumors . Last fall, rumors were circulating on the market. And having overheard rumors of possible derivatives by the French to increase their stake in Banco BPM to 20% , Unicredit wasted no time and launched its exchange offer on November 25th .

The French's first move . Fears were not misplaced because, after just ten days, on December 6, 2024, Crédit Agricole announced that it had options on Banco BPM that could be converted into shares equal to 5% of the capital .

A question of quotas . The optioned shares, added to the previous quota, bring the French's overall stake to just under 15% . But above the significant 10% quota that obliges them to seek authorization from the ECB to exceed it.

Once requested and obtained, Crédit Agricole has free rein to climb unhindered up to the next relevant threshold of 20% .

Unicredit is failing to take off. Six months pass and UniCredit's bid fails to take off ; rather, it becomes increasingly bogged down by the government 's intervention in April, which, with its golden power, imposes such stringent restrictions that it jeopardizes the sound and prudent management of the two banks if they merge.

The requirements . The restrictions on loans and securities portfolios, for example, are contrary to the good governance of any bank, as the Bank of Italy's supervisory authority should have emphasized, because they can undermine UniCredit's liquidity .

The first reason for the resignation . Thus, things dragged on until June, when Orcel, in an interview with Repubblica , realizing he couldn't win against the government's opposition (the first reason for the resignation), declared he was ready to withdraw. When asked what would happen next, he replied that " Crédit Agricole will remain the reference shareholder with 20%, or perhaps more."

The French's second move . Even that "maybe more," like the first derivatives of autumn, materializes shortly thereafter, because three weeks later, on July 11, the French bank finally reveals its hand and reveals that it holds 19.8% of the Italian bank and that it has asked the ECB to increase its stake beyond 20% , with the possibility of reaching 29.9% without having to launch an offer that would only be triggered if the stake exceeds 30%.

Perfect timing . The announcement's timing is perfect, coming one day before the TAR ruling , which dismantles two out of four points of the golden power, and three days before the letter from the European DG Comp , which completely tears it to pieces.

The second reason for the withdrawal . And it's perfect because with that statement, Orcel understands that, despite the situation turning in his favor with the semi-favorable opinion of the Administrative Court and the favorable opinion of the European Commission, his takeover now has a 30% stake in Crédit Agricole, capable of blocking, even if it were to acquire a large number of shares, the potential absorption of Banco BPM.

The ability to work together. In the capital of the former popular bank, beyond the possibility of Crédit Agricole increasing its stake to 29.9%, a dozen French shareholders, from Banque Postale to BNP Paribas to Natixis, are ready to work together and support the interests of their French cousins.

The blocking minority . This French blockade would effectively make UniCredit's rise impossible even if the European Union forced the Italian government not only to reformulate, but to cancel, the golden power .

Lay down their arms . Thus, one day before the offer deadline, despite the 30-day extension granted by Consob to clarify the interventions of institutions and regulators, and despite the government's obligation to respond to the EU's criticisms by August 11th with the possibility of easing the restrictions, Orcel decided to abandon the game .

"The manner still offends me ." What doesn't add up in this story, however, is not that Crédit Agricole is becoming the reference shareholder of an Italian bank. Indeed, European consolidation is good news . But the manner.

The market was not protected . The government, through its golden power, citing reasons of national interest, prevented the dispute over Banco BPM from taking place according to market rules , where two offers would have had to compete, one from Unicredit and one from Crédit Agricole .

The comparison . In a potential market battle, the Italians would have been more powerful than the French. Even if we simply consider the market capitalization of the two banks if both takeover bids had occurred through a share swap, Unicredit's market capitalization would be €95 billion , almost double Crédit Agricole's €49 billion.

Public relations count . The French, however, unlike Unicredit, have acted very well with the government and, making themselves available, have even announced that they do not want control of Banco BPM, even though they have effectively obtained it.

The third hub . Now that Unicredit is out of the way (but never say never), we can move on to the next chapter: the creation of Italy's third banking hub , which the government's initial plans envisioned a merger between Banco BPM and Monte dei Paschi .

And what about Crédit Agricole? The time isn't yet ripe, because Siena is currently bidding for Mediobanca , which will continue until September. But if things were to proceed, it remains to be seen what role Crédit Agricole would play.

History repeats itself . The most likely solution is that, as happened in 2006 with the merger between Banca Intesa and Banca Sanpaolo , the French obtained a compensation . Then it was control of Cariparma , FriulAdria and subsequently of Cassa di Risparmio della Spezia .

The French "bill." In the case of Banco BPM, to accept UniCredit's offer, the French had asked Orcel in exchange for 500 branches , Banco BPM's 40% stake in Agos , and a 10-year asset management agreement to allocate the funds raised through the combined banks' network to Amundi (controlled by Credit Agricole).

These conditions could hardly be duplicated by a merger between Banco Bpm and Monte dei Paschi, but in fact they indicate the preferred path for Crédit Agricole to give up control of the bank currently led by Giuseppe Castagna .