Banco BPM Rejects UniCredit Takeover Bid: A Clash of Valuations and Regulatory Overreach

Banco BPM’s formal rejection of UniCredit’s €10 billion takeover bid in April 2025 has ignited a high-stakes showdown between corporate strategy and regulatory interference. While the immediate stock reactions—Banco BPM’s shares rising 1.2% versus UniCredit’s 0.8% drop—reflect investor skepticism toward the merger’s fairness, the deeper implications involve a clash over valuation, governance, and Italy’s newfound assertiveness in banking consolidation.

The Rejection: A Valuation Dispute
At the core of the rejection is Banco BPM’s objection to UniCredit’s offer, which valued its shares at a 9% discount to their market price and offered no control premium. Under the terms, Banco BPM shareholders would receive just 14% of projected synergies (€1.2 billion annually pre-tax) while contributing an estimated 18% to the combined entity’s 2027 profits. Banco BPM argued this disparity, combined with tax implications from the all-share structure and the lack of a consolidated business plan, made the deal “not fair” and “not convenient” for its investors.

The rejection underscores a broader theme: smaller banks resisting undervalued bids to pursue independent growth. Banco BPM’s standalone strategy includes a targeted €2.15 billion net income for 2027 and €6 billion in shareholder remuneration by the same year—a path its board deems superior to UniCredit’s offer.

Regulatory Overreach Complicates the Deal
The Italian government’s unprecedented use of its “Golden Power” to impose conditions on the merger adds another layer of complexity. To approve the deal, UniCredit must:
- Exit Russian operations within 9 months, despite geopolitical hurdles.
- Maintain Banco BPM’s loan-to-deposit ratio in southern Italy for five years.
- Divest €22.2 billion in southern Italian loans by late 2025 to avoid monopolistic dominance.
- Refrain from reducing Banco BPM’s investments in Italian securities via Anima Holding for five years.

These demands, coupled with daily fines for non-compliance and quarterly reporting requirements, have spooked investors. UniCredit’s shares fell as much as 4% in Milan trading after the conditions were revealed, while Banco BPM’s dipped 2%, signaling broader market anxiety over regulatory overreach.

Strategic Crossroads for Both Banks
For UniCredit, the merger’s appeal lies in Banco BPM’s 170 southern Italian branches, which offer access to underpenetrated SME markets. However, the loan divestiture requirement—potentially eroding profitability in these regions—could undercut the deal’s value. Meanwhile, the bank faces a tight timeline: the voluntary public offer for Banco BPM shares runs through June 2025, with payment due by July.

Banco BPM, by contrast, has doubled down on its independence, citing a €1.3 billion annual synergy target under its standalone plan versus the €7.52 billion benefit UniCredit would accrue. This highlights a stark asymmetry in value distribution, which investors appear to favor.

Outlook: Regulatory Risks vs. Strategic Gains
The next critical juncture is Q1 2025 earnings reports, where UniCredit must demonstrate progress on its CET1 capital ratio (targeted at 13.2% during the divestment period). As of Q3 2023, UniCredit’s CET1 stood at 14.3%, but execution delays or undervalued loan sales could strain this buffer.

Additionally, the €22.2 billion loan divestment must be completed by year-end 2025, with a six-month extension possible. Any delays risk fines and investor distrust. Banco BPM’s stock, while resilient post-rejection, remains vulnerable to regulatory uncertainty—a stark contrast to its 1.2% April gain.

Conclusion: A Test of Resilience
Banco BPM’s rejection has crystallized two realities:
1. Valuation Matters: Investors penalized UniCredit for an offer perceived as overly conservative, while Banco BPM’s confidence in its standalone strategy resonated with shareholders.
2. Regulatory Risks Dominate: Italy’s use of Golden Power—a tool typically reserved for foreign acquisitions—sets a precedent for domestic mergers, raising the specter of political interference in market-driven deals.

The stakes are high. If UniCredit navigates the loan divestment and maintains its CET1 ratio, the merger could still unlock synergies and geographic diversification. However, regulatory overreach and valuation disputes have already imposed a 0.6x price-to-book discount on UniCredit’s shares—a penalty it may struggle to erase without concessions.

For Banco BPM, the rejection has been a tactical win, but its success hinges on executing its €6 billion shareholder remuneration plan by 2027. The market’s verdict is clear: independent growth, if achievable, may be worth more than a diluted merger—at least for now.

As Europe’s banking sector braces for consolidation, the Banco BPM-UniCredit saga serves as a cautionary tale: in a world of regulatory tightrope walks and shareholder scrutiny, even the largest banks must tread carefully to avoid becoming pawns in a game of valuation and politics.