UniCredit (BIT:CRDI) has launched a surprise €10.5bn all-stock bid against domestic rival Banco BPM (BIT:BAMI), amid a political backlash and fears of Italy’s broader banking strategy. raised concerns about the impact. The move disrupts government plans to merge Banco BPM with state-owned Monte dei Paschi di Siena (MPS), making it the third largest player in Italy’s banking sector alongside Intesa Sanpaolo and UniCredit itself. There is a possibility that it will be created.

UniCredit is Italy’s second largest bank and has a strong presence across Europe, offering retail, corporate and investment banking services. Banco BPM is Italy’s third largest financial operator, with deep roots in Italy’s northern regions, especially Lombardy, with a focus on retail banking and wealth management.

The bid announced on Monday values ​​Banco BPM shares at 6.657 euros per share, a premium of just 0.5% over the previous closing price. UniCredit CEO Andrea Orcel said the proposed acquisition follows Banco BPM’s recent move to acquire a 5% stake in MPS and bid for asset management company Anima Holding. It is positioned as a response to the progress of integration within the banking sector.

Italy’s economy minister, Giancarlo Giorgetti, warned that the government could use “golden power” to protect strategic assets, saying UniCredit’s bid meant “we have communicated with the government.” However, no agreement was reached.” Giorgetti’s comments, coupled with criticism from Deputy Prime Minister Matteo Salvini, highlight the political tensions surrounding the deal. Salvini expressed skepticism about UniCredit’s change in strategy, saying: “UniCredit wanted to grow in Germany. I don’t know why they changed their mind.”

Orcel said the proposed merger would generate annual synergies of 1.2 billion euros, including 900 million euros in cost savings and 300 million euros in increased revenue, while increasing UniCredit’s presence in Italy’s wealthy Lombardy region. He emphasized that the feeling will also be strengthened. He defended the timing of the offer, saying: [Italian banking consolidation]Despite the political and regulatory challenges, Orcell reassures investors that the transaction is in line with UniCredit’s financial objectives, including maintaining a CET1 capital ratio of at least 13% and continuing to pay dividends. I let it happen.

UniCredit’s bid for Banco BPM comes as the bank acquires a stake in Germany’s Commerzbank (ETR:CBKG), a controversial move that has faced resistance from Berlin. are. Although Orcel insisted that the acquisition of Banco BPM will not affect UniCredit’s strategy in Germany, analysts have raised concerns about the feasibility of managing two important transactions at the same time.

The proposal requires approval from Banco BPM’s board of directors, the European Central Bank and antitrust regulators, and UniCredit aims to complete the merger by mid-2025. However, political tensions, regulatory oversight and competing interests could pose significant obstacles to a successful agreement.

Banco BPM’s share price rose 5.5% following the announcement, while UniCredit’s share price fell 4.8%, reflecting investors’ mixed feelings about the proposed merger and its broader implications.