UniCredit-Banco BPM: OPS Uptake Remains Minimal at End of Second Offer Week

The UniCredit-Banco BPM voluntary public exchange offer (OPS) has hit a critical snag: after the second offer week ending May 12, 2025, only 12.8% of shares were tendered, a modest improvement from the first week’s 5.2% but far below the 30% threshold required for UniCredit to proceed with delisting Banco BPM. This tepid response underscores deepening skepticism among shareholders, regulatory hurdles, and strategic misalignment between the two banks.

The Uptake Dilemma: Why the Numbers Matter

The OPS, which began on April 28, 2025, sought to consolidate UniCredit’s control over Banco BPM through an all-share offer of 0.175 new UniCredit shares per Banco BPM share. Despite an 8% premium increase in the second offer period (from an initial 7%), participation remains dismal. Combined uptake across both weeks totals just 18%, leaving UniCredit $1.1 billion short of Banco BPM’s market value—a stark mismatch that highlights investor doubts about the deal’s fairness.

Regulatory Roadblocks: A Perfect Storm

The Italian government’s “golden power” has imposed three non-negotiable conditions on UniCredit:
1. Exit Russian operations within 9 months, despite Russian legal requirements for presidential approval to divest.
2. Maintain Banco BPM’s loan-to-deposit ratio at 115% for five years, a figure far higher than UniCredit’s 85%, severely limiting operational flexibility.
3. Preserve investments in Anima Holding, a fund manager acquired by Banco BPM, while supporting its growth.

UniCredit has raised objections, arguing these constraints could lead to regulatory fines and “unintended consequences” under EU law. CEO Andrea Orcel has stated the bank cannot proceed unless terms are revised—a stance that risks the deal’s collapse.

Shareholder Resistance: Valuation Gaps and Governance Fears

Banco BPM’s board has formally rejected the bid, citing a 9% discount to its market price and governance concerns. Shareholders are further deterred by:
- A 14% stake in the combined entity versus their expected 18% equity contribution based on 2027 profit projections.
- Risks of diluted geographic influence and 6,000 job cuts, as outlined by Banco BPM’s CEO Giuseppe Castagna.

Market sentiment reflects this skepticism: Banco BPM’s shares trade €1.1 billion above UniCredit’s offer, signaling investor belief the bid will falter.

Strategic Crossroads: Withdrawal or Revisions?

UniCredit faces a stark choice by the June 23 tender deadline:
1. Withdraw the bid, acknowledging the regulatory and valuation gaps. This would free capital for other targets like Commerzbank (where it holds a 28% stake) or Generali, though both face regulatory pushback.
2. Revise terms, potentially increasing the premium or negotiating exemptions on Russian operations. Analysts estimate a 10% “sweetener” may be needed to meet the 30% threshold—a costly move amid already strained EU banking margins.

Geopolitical and Operational Risks

The Russian operations clause is a non-starter for UniCredit. With only 10% of its Russian business remaining, the bank faces legal and logistical barriers to full withdrawal. Compounding this, its stake in Generali draws scrutiny, diverting Orcel’s focus from the Banco BPM deal.

The Broader Implications

The OPS’s failure would send ripple effects through Italy’s banking sector. It could:
- Undermine regulatory confidence, as the government’s “golden power” tactics clash with EU merger principles.
- Limit UniCredit’s expansion, forcing reliance on smaller acquisitions or organic growth.
- Strengthen Banco BPM’s independence, though its strategic ambitions—like its €1.6 billion Anima Holding acquisition—are currently frozen under Italy’s “passivity rule.”

Conclusion: A Deal on Life Support

The OPS’s 18% uptake after two weeks is a damning indicator. With regulatory conditions unyielding, shareholder resistance entrenched, and Banco BPM’s market value outpacing the offer, UniCredit is cornered. Unless Rome relents on its demands or UniCredit sweetens the deal significantly, withdrawal appears inevitable. Investors should prepare for volatility in both banks’ stocks and brace for UniCredit to pivot toward alternative targets—though none are free of hurdles. The OPS saga underscores a painful truth: in banking mergers, valuation and autonomy are non-negotiable, and neither side here is willing to compromise.