MILAN (Reuters) -Leading governance adviser Glass Lewis has recommended shareholders in Monte dei Paschi (MPS) back a takeover bid for Mediobanca, by approving issuing the necessary shares in a vote scheduled on April 17.
“We readily acknowledge that the proposed combination of Mediobanca with MPS carries identifiable execution risks, particularly in terms of cultural integration and the potential disruption to Mediobanca’s franchise,” it wrote in its report for MPS’ annual general meeting.
“Overall, we believe MPS has presented a coherent strategic and financial rationale to justify proceeding with its efforts to acquire Mediobanca,” it said.
MPS, for a decade at the fore of Italy’s banking crisis until a 2017 state bailout, shocked the country’s financial sector this year by bidding for Mediobanca, a revered financial institution.
The bid is unusual because the two banks have complementary business models and overlaps, which normally drive cost cuts in bank mergers, are limited.
MPS is betting instead on tax credits stemming from past losses which it will be able to use in larger measure if it secures 50% plus one share of Mediobanca. It also envisages boosting revenues and cutting some costs by unifying certain roles, such as risk control.
In MPS’ view, the limited overlaps lessen execution risks, with Mediobanca’s business and brand to be kept as a separate unit.
MPS CEO Luigi Lovaglio has said that he would appoint a separate Mediobanca CEO, given his own background is in commercial, and not investment, banking.
“We note that combining a retail bank with a capital markets advisory franchise is not unheard of,” Glass Lewis said.
“We believe shareholders should also give due consideration to the track record of MPS’ CEO,” it said, citing his “proven experience in executing complex M&A transactions and operational integration.”
Institutional Shareholder Services, another leading proxy adviser, last week recommended voting against the share issue.
(Reporting by Valentina Za, editing by Alvise Armellini and Raju Gopalakrishnan)
