UBI shareholder group rejects Intesa's 'hostile' offer

By Andrea Mandala and Valentina Za

BERGAMO, Italy (Reuters) - A group of UBI Banca <UBI.MI> investors holding 18% of the Italian bank's share capital on Monday dismissed Intesa Sanpaolo's <ISP.MI> takeover offer as unacceptable, casting doubt on a bid to create an Italian banking champion.

The CAR shareholder pact said that the 4.9 billion euro ($5.3 billion) offer, the biggest banking deal in Europe in a decade, was "hostile, unsolicited and not consistent with UBI Banca's underlying values".

The pact, formed in September last year, groups wealthy families and business owners from the northern province of Lombardy, UBI's heartland, as well as some small banking foundations.

The statement, approved unanimously, came only hours after Intesa Sanpaolo CEO Carlo Messina expressed confidence in the success of the offer, reiterating there was "zero probability" it could be improved.

Swooping on Italy's strongest second-tier lender with a midnight announcement, Intesa on Monday offered 1.7 new shares for each UBI share tendered to create the euro zone's seventh-largest bank focused on wealth management and insurance.

UBI, which had presented its own strategic plan hours before Intesa's bid, has reacted coolly and on Wednesday said it would hire advisers to evaluate the offer as well as any alternatives.

Credit Suisse is expected to be hired as an adviser by UBI.

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Intesa's offer values UBI shares at 4.254 euros each, a 22% premium to UBI's closing price on Monday, when shares had risen sharply after the strategic plan.

UBI shares extended losses after news of the rejection broke and was trading 1.25% lower by 1333 GMT.

Intesa has set a minimum 66.7% acceptance threshold and is counting on institutional investors that own more than 50% of UBI's capital tendering their shares. It has reserved the right to lower the minimum threshold to 50% plus one share.

In an interview with Bloomberg TV, Messina said investors liked both the move and its timing, which answered calls by European banking regulators for lenders to join forces, adding that other transactions would follow.

"Our move is the first in Europe that can create a strong champion but in my expectations, other transactions can follow in the next months .... in domestic markets," he said.

Analysts have said Intesa's decision could trigger mergers in other countries such as Spain, but cross-border deals remained unlikely given the lack of a level playing-field across the euro zone and of overlaps to push through cost cuts.

Italian banks have been restructuring after the country's worst recession since World War 2, shedding bad debts and cutting costs.

Too small to shoulder mounting digital investment costs, second-tier players face pressure to combine. The planned sale of the government's 68% stake in Monte dei Paschi di Siena <BMPS.MI> next year was seen as a possible trigger.

Sources on Wednesday said Intesa's offer had taken the government by surprise and complicated its re-privatisation plans.

UBI had been tipped as a buyer for Monte dei Paschi, while Intesa's deal also involves BPER Banca <EMII.MI>, another name that had circulated in government circles in connection with the Tuscan bank.

BPER has agreed to buy a portion of the combined business from Intesa.

Carlo Cimbri, the head of BPER's top shareholder UnipolSai <US.MI> said in a newspaper interview on Thursday that BPER's management would "not have time to think about anything else" this year apart from integrating the new business, when asked if BPER could be further involved in Italian bank consolidation.

More banking deals, however, could follow in 2021, he added.

($1 = 0.9268 euros)

(Editing by James Mackenzie, Kirsten Donovan and Barbara Lewis)