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France's Credit Agricole makes $875 million buyout offer for Italy's Creval

11/23/2020 | 10:27am

PARIS/MILAN (Reuters) - France's Credit Agricole offered to buy third-tier Italian lender Creval for 737 million euros ($875 million) on Monday, as a wave of consolidation sweeps Italy's banking sector.

France's No.2 bank had been considering expanding in Italy, its second biggest market, and Creval and larger rival Banco BPM had both been tipped as potential targets.

Credit Agricole Italia will offer 10.50 euros per Creval share, a 21.4% premium on Friday's closing price. By 1402 GMT shares in Creval had jumped 22% to 10.6 euros. Credit Agricole shares rose 2.8%. Banco BPM declined 3.8%.

The buyout offer is expected to be launched in March or April and is subject to a two-thirds minimum acceptance threshold by Creval shareholders.

Intesa Sanpaolo's surprise takeover of UBI earlier this year prompted rivals in Italy to explore potential alternative deals.

Credit Agricole Italia had held preliminary talks with Banco BPM, Italy's No.3 bank and a long-standing commercial partner, but they stalled, sources have said.

Banco BPM on Friday welcomed merger overtures by the top investor in BPER Banca.

Credit Agricole Italia has also doubled a 5% Creval stake acquired in 2018 as part of a deal to sell insurance products.

"We were in an ambiguous situation. We had this long-term bancassurance accord but it was difficult to pursue synergies," Credit Agricole Italia CEO Giampiero Maioli told a press briefing.

Plans for the buyout offer emerged over the last month and were discussed with the European Central Bank and Italian authorities, including the Treasury with which relations are excellent, Maioli said.

The deal may benefit from tax breaks for mergers that Italy has drafted to facilitate the re-privatisation of bailed-out Monte dei Paschi, a scheme which Mediobanca Securities analysts see as "a game changer for consolidation."

"We've always taken part in Italian (banking) consolidation and facilitated it," Maioli said. "This new investment ... is a testament to our degree of confidence in the country," he said.

Mergers are also attractive because of discounted bank valuations, which translate into paper profits for buyers.

The offer values Creval at 0.4 times its tangible assets, a level that analysts said was "good news" for Italian banks while still leaving a 1 billion euro earnings boost that Credit Agricole Italia will use to cover clean-up and restructuring costs.

The unit plans to launch a share issue to rebuild its capital buffers, fully guaranteed by Credit Agricole.

Maioli said there were no other merger discussions in Italy.

He said the Creval deal would yield 150 million euros a year in savings before taxes, leading to a return on equity above 10% in 2023 for the combined entity.

The group would have a 5% market share nationwide, with more than two thirds of branches concentrated in Italy's wealthy north.

The 737 million euro offer for Creval includes the outlay for the agreed purchase of a 5.4% Creval stake from London-based fund Algebris, as well as the acquisition of a 9.8% holding from the group's Credit Agricole Assurance unit.

Credit Agricole entered Italian retail banking in 2007 when it bought northern banks Cariparma and Friuladria. In 2016, its asset management arm Amundi bought rival Pioneer Investments from UniCredit for 3.6 billion euros. The following year the French cooperative group acquired three small failing banks.

"We keep a long-term view and don't get scared if Italy's debt risk premium goes up and down," Maioli said.

($1 = 0.8421 euros)

(Reporting by Matthieu Protard and Sudip Kar-Gupta in Paris and Andrea Mandala in Milan; Editing by Kirsten Donovan, Susan Fenton and Barbara Lewis)

By Matthieu Protard, Andrea Mandala and Valentina Za

© Reuters 2021
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