Banco BPM Defies UniCredit's Undervalued Bid: A Battle Over Strategy and Sovereignty

In a dramatic turn of events, Banco BPM has rebuffed UniCredit’s €10.1 billion takeover bid, calling it “deeply inadequate” and a threat to its strategic autonomy. The rejection, announced earlier this year, has ignited a high-stakes clash between two Italian banking giants, with implications for the future of regional banking, geopolitical risk, and corporate governance.

At the heart of the dispute is the valuation. UniCredit’s offer, initially structured as a 0.5% premium over Banco BPM’s closing stock price the day before the bid was announced, now sits at a 7.6% discount relative to Banco BPM’s post-announcement share price. This stark reversal highlights the market’s skepticism of UniCredit’s motives. Banco BPM’s board argues the bid “fails to reflect the bank’s underlying profitability and potential for growth,” a stance reinforced by its soaring stock price once the deal became public.

The strategic stakes are equally contentious. Banco BPM is locked in critical acquisitions, including a €1.6 billion stake in Anima Holding, an asset manager, and a 5% holding in Monte dei Paschi di Siena (MPS), Italy’s state-backed bank. Under Italy’s “passivity rule,” accepting UniCredit’s bid would force Banco BPM into a passive role during the merger process, halting these transactions. Banco BPM’s CEO, Giuseppe Castagna, framed this as an existential threat: “We are a big autonomous bank… close to small and medium-sized companies that make up the backbone of our country.”

Geographically, Banco BPM views the merger as a shift away from its core strength: Lombardy, Italy’s economic powerhouse centered in Milan. Castagna warned that UniCredit’s broader footprint would dilute focus on high-growth regions, diverting resources to areas with “lower growth and higher geopolitical risk.” This critique aligns with UniCredit’s exposure to Eastern Europe, where geopolitical tensions persist.

The Italian government has further complicated matters. Under its “golden power” rules, UniCredit must exit its Russian operations within nine months—a near-impossible task under current Russian laws requiring presidential approval. Analysts estimate this could cost UniCredit up to €2 billion in fines or operational disruptions. The government has also demanded UniCredit maintain investments in Italian securities via Anima Holding, a condition the bank calls “unworkable.”

These regulatory hurdles have pushed UniCredit to pause its bid until clarity emerges. Prime Minister Giorgia Meloni’s administration, meanwhile, has signaled support for Banco BPM’s autonomy, with reports suggesting it aims to delay the merger indefinitely. Analyst Johann Scholtz of Morningstar noted that UniCredit’s 0.5% premium is “steep compared to historical trading,” suggesting a 10% “sweetener” might be necessary to sway shareholders.

Yet Banco BPM remains unmoved. Its board has reaffirmed its 2023–2026 strategic plan, which prioritizes organic growth in Lombardy and Italy’s SME sector. With its stock price up 12% since the bid’s announcement, shareholders appear to side with management.

The standoff underscores a broader trend in European banking: the tension between scale-driven megabanks like UniCredit and smaller institutions clinging to niche markets. For investors, the key questions are valuation and autonomy. UniCredit’s bid, even if revised, faces structural barriers. The passivity rule’s restrictions, regulatory overreach, and Banco BPM’s growth trajectory suggest the deal’s odds are long.

In conclusion, Banco BPM’s rejection is not just about price—it’s a defense of its identity as a regional, customer-centric bank. With UniCredit’s Russian entanglements and the Italian government’s opposition, the merger’s path is blocked unless terms shift dramatically. Investors should weigh Banco BPM’s rising stock price and strategic clarity against UniCredit’s valuation misstep and geopolitical baggage. For now, Milan’s banking star is staying independent.