Hostile Takeover: Monte dei Paschi’s Bid for Mediobanca Redraws Italy’s Banking Map

The Italian banking sector is on the brink of a seismic shift. On April 17, 2025, Monte dei Paschi di Siena (MPS) secured shareholder approval for its €12.5 billion hostile takeover bid for Mediobanca, Italy’s premier investment bank. The vote, representing 86.5% of MPS’s voting capital, marks a bold move in a sector where consolidation has long been debated but rarely executed. The outcome could redefine Italy’s financial landscape—or expose MPS’s fragile recovery to the whims of market forces.

The Strategic Imperative: Scale or Suicide?

MPS CEO Luigi Lovaglio has framed the bid as a “strategic necessity” to counter slowing revenue growth and the threat of secular stagnation in Europe. The combined entity would control €300 billion in assets, rivaling UniCredit and Intesa Sanpaolo. Yet critics argue the move is a Hail Mary for MPS, which has struggled to recover from a €8 billion state bailout in 2017. The bid requires MPS to issue €13.19 billion in new shares—far exceeding its current market cap of €8.4 billion—raising red flags about dilution and capital adequacy.

The Alliance of Unlikely Supporters

The bid’s approval hinged on a coalition of forces. The Italian Treasury, still holding 11.7% of MPS, greenlit the move, signaling tacit government support for banking consolidation. Private investors like Francesco Gaetano Caltagirone (9%) and Delfin (controlled by Leonardo Del Vecchio’s estate) added critical backing, leveraging their cross-shareholdings in Mediobanca and MPS. International funds such as PIMCO and Vanguard also endorsed the bid, though their 3.5% stake in MPS suggests limited skin in the game.

The Risks: Legal, Financial, and Structural

Mediobanca’s board has called the bid “a value-destroying distraction,” arguing it would disrupt its wealth management and investment banking franchise. Legal challenges loom: Italy’s corporate governance laws permit hostile takeovers, but Mediobanca’s cross-shareholdings—via Caltagirone and Delfin—with MPS and insurer Generali could expose governance conflicts.

Financially, MPS’s Tier 1 capital ratio, already thin at 14.3% (below the ECB’s 14.5% threshold for “well-capitalized” banks), faces further strain from the capital increase. With the ECB’s terminal rate now at 4.25%, the cost of funding the deal could escalate.

The Market’s Divided Verdict

Investor sentiment is split. MPS shares fell 1.3% post-announcement as dilution fears outweighed strategic optimism. Mediobanca’s stock, however, rose 4.24%, suggesting investors see the bid as inevitable. For the deal to succeed, MPS must secure at least 50% of Mediobanca’s shares during the tender period, likely starting in July . Mediobanca’s shareholders—many of whom are long-term institutional investors—may demand more than the 13% premium on offer.

The Bottom Line: A Gamble with High Stakes

The bid’s success hinges on three variables:
1. Shareholder Appetite: Will Mediobanca’s investors accept the premium, or demand higher terms?
2. Regulatory Green Lights: Will EU antitrust authorities block the merger, given Italy’s fragmented banking sector?
3. Execution Risks: Can MPS integrate two culturally distinct institutions—MPS’s traditional retail banking vs. Mediobanca’s high-end investment services—without triggering operational chaos?

Historically, Italian banking mergers have been rocky. UniCredit’s 2005 acquisition of HVB Group cost €2.5 billion in integration expenses and led to a €2.4 billion write-down in 2008. For MPS, failure could be catastrophic: its post-bailout recovery remains fragile, with non-performing loans still at 5.2% of total assets.

Conclusion: A High-Wire Act with a 50/50 Chance

The MPS-Mediobanca deal is a high-risk, high-reward gamble. On one hand, success would create a banking titan capable of competing with European peers and unlocking synergies worth €1.2 billion annually. On the other, failure could push MPS into another liquidity crisis, forcing further government intervention.

The math is stark:
- Upside: A 50% tender acceptance would give MPS control, unlocking Mediobanca’s fee-based revenue streams and reducing its reliance on interest-sensitive loans.
- Downside: A 40% acceptance would leave MPS overleveraged, with its equity diluted and capital ratios in violation of ECB rules.

Investors should monitor two key metrics:
1. Mediobanca’s tender participation rate—if it exceeds 60%, the bid becomes a slam dunk.
2. MPS’s post-tender capital ratio—if it dips below 13%, ECB intervention becomes likely.

In the end, this is not just a battle for control of two banks—it’s a referendum on whether Italy’s financial sector can modernize without government handouts. The stakes could not be higher.