Investors are pocketing some gains in Banca Intesa and Sanpaolo IMI after the lenders announced plans to create an $80 billion (€62.6 billion) heavyweight and shifted the focus to other potential targets in Italy's lucrative banking sector.
Intesa and Sanpaolo said on Saturday their boards had approved guidelines for an all-share plan to create the dominant player in Italy's retail market with a 20 per cent stake and a bank big enough to compete with European giants.
Market talk about a possible tie-up between Italy's second- and third-largest banks had arisen before the summer, but analysts and traders had not expected a go-ahead so quickly.
Sanpaolo chairman Enrico Salza told daily La Repubblica he and Intesa chairman Giovanni Bazoli reached an initial deal on August 5th and that talks continued into Saturday afternoon.
Under the terms of the planned deal, Intesa is to offer 3.115 shares for each ordinary and preferred Sanpaolo share and will issue 5.84 billion new shares.
Spain's Santander, a leading Sanpaolo shareholder with 8.4 per cent, said the share swap ratio did not reflect the true worth of Sanpaolo, adding it would take a decision on how to maximise the value of its stake at the appropriate time.
But analysts, who expect Santander to sell and book a hefty capital gain, said Intesa's €29 billion offer was fair.
"We think this represents a fair deal, probably even slightly better for Sanpaolo IMI shareholders," WestLB analysts said in a research note.
Intesa chief executive Corrado Passera is to head the new bank with Sanpaolo director-general Pietro Modiano as his deputy.
The lenders went to great lengths to present the plan as a merger of equals and even proposed a German-style supervisory board to ensure that both Bazoli and Salza would keep key roles.
In Germany, companies have a non-executive board of directors which oversees the executive management. The deal is expected to lead to more mergers in Italy's fragmented bank sector.
