BPER's Undervalued Offer for Banca Popolare di Sondrio: A Test of Shareholder Rights and Fair Valuation in Italian Banking

The proposed merger between BPER Banca (BPE.MI) and Banca Popolare di Sondrio (BPS) has sparked a heated debate over fair valuation and shareholder rights in Italy's banking sector. At its core, BPER's revised offer—which values BPS at a 5.5% discount to its current market price—raises critical questions about whether the deal respects the intrinsic value of BPS's equity or merely seeks to exploit consolidation pressures. For BPS shareholders, the stakes are clear: reject the undervalued terms or risk setting a dangerous precedent for fair treatment in future banking mergers.

The Valuation Disparity: A 5.5% Discount Signals Exploitation

BPER's offer, announced in late June 2025, proposes exchanging 1.45 newly issued shares plus €1 in cash for each BPS share. While this initially seemed like a strategic move to address regulatory concerns, the terms now reveal a glaring flaw. By July 7, 2025, BPS's shares traded at €11.74, yet the offer's implied value—based on BPER's closing price of €7.65—totals just €10.89 per BPS share, a 5.5% discount (see data query below).

This valuation gap is not trivial. BPS's robust fundamentals, including a CET1 ratio of 16.8% (vs BPER's 14.5%) and strong regional lending performance, underpin its higher market valuation. Analysts note that BPS's standalone growth potential—particularly in Lombardy's small-business sector—far exceeds BPER's ability to deliver the €290 million in synergies it claims. Shareholders are right to demand parity.

BPS's Stronger Fundamentals: Why the Discount Doesn't Add Up

BPS is not just a smaller player to be absorbed. Its €5.39 billion market cap (as of July 7) reflects operational strengths that BPER's offer overlooks:
- Asset Quality: BPS's non-performing loan (NPL) ratio of 2.1% is half of BPER's 4.3%.
- Cost Efficiency: BPS operates with a 1.2% lower cost-to-income ratio than BPER.
- Liquidity: BPS holds a 169% Liquidity Coverage Ratio, exceeding BPER's 145%.

These metrics suggest BPS could thrive independently, especially in a fragmented Italian banking landscape. BPER's focus on synergies—rooted in branch closures and cost-cutting—risks undermining BPS's competitive edge. As one analyst noted, “This deal is less about creating value and more about BPER solving its own capitalization challenges.”

Unipol's Skepticism: A Forward Sale Signals Lack of Confidence

The merger's credibility took a hit when Unipol SGR, BPS's largest shareholder (19.7%), hedged its position by selling 82 million BPER shares in a forward sale. This move, disclosed in June 2025, underscores institutional skepticism about BPER's ability to deliver on its promises.

Unipol's actions are telling: if the deal proceeds, its profit from the forward sale would offset potential losses from the undervalued BPER shares it receives. For retail investors, this raises a red flag. Why would a major shareholder protect its interests at the expense of BPS's value?

Regulatory Risks: BPER's Divestiture Deadline Could Derail the Deal

Compounding the valuation concerns are regulatory hurdles. Italy's antitrust authority (AGCM) has mandated BPER to divest six Lombardy branches within 10 months of deal closure. This creates a liquidity risk: BPER must execute the divestiture swiftly while integrating BPS's systems and staff. Delays could force renegotiation or abandonment, leaving BPS shareholders holding shares in a destabilized entity.

The Precedent for Shareholder Rights in Banking Mergers

This deal is more than a financial transaction—it's a test of corporate governance norms in Italy's banking sector. Accepting a 5.5% discount would signal to other institutions that shareholders can be pressured into subpar deals under consolidation pressures. Conversely, rejecting the terms until BPS is fairly valued could set a precedent for due diligence and equity in future mergers.

Investment Advice: Reject Until Terms Reflect Fair Value

For BPS Shareholders:
- Vote Against the Offer: The 5.5% discount and BPER's shaky synergy claims justify rejection. Demand a revised exchange ratio of 1.55–1.60 BPER shares to match BPS's market price.
- Monitor Regulatory Compliance: AGCM's divestiture timeline (10 months) is a critical risk. Any delays could weaken BPER's negotiating position.

For BPER Investors:
- Watch Liquidity Metrics: BPER's CET1 ratio target of 15% by 2027 hinges on cost-cutting and synergies that may not materialize. A failed merger could strain its capital position.
- Avoid Overexposure: The deal's success is far from certain. BPER's shares remain volatile—€7.49 to €7.99 in June 2025—reflecting investor uncertainty.

Conclusion: Fair Valuation Is Non-Negotiable

BPS shareholders are being asked to trade their stake at a discount to a weaker partner, with no guarantee of synergies or stability. The merger's success depends on BPER addressing the valuation gap—a gap that reflects BPS's superior fundamentals and BPER's operational challenges. By rejecting the offer, BPS shareholders can demand respect for their equity and set a vital precedent for fair play in banking consolidation.

In an industry where trust is hard-won, this deal is a litmus test. Choose fairness—or risk a future where undervalued mergers become the norm.