Portugal’s largest private-sector banking group,
Millennium BCP, has had a very turbulent year. It dramatically
failed to buy domestic rival BPI, has lost its high-profile CEO,
its 2010 strategic plan is in doubt and it could now find itself
the subject of a takeover. Rodrigo Amaral reports


It has been a momentous year for Millennium BCP, Portugal’s
second-largest bank. During the first quarter of 2007, the group
went all out in an aggressive – but ultimately failed – bid to buy
smaller rival BPI in an effort to replace the savings bank Caixa
Geral de Depósitos at the top of Portugal’s banking industry. Going
into the fourth quarter of the year, the market has now begun to
speculate whether Millennium has itself become a possible take-over
target, with the bigger players from neighbouring Spain singled out
as potential suitors.

In the first half of 2007, Millennium’s shares rose by more than 53
percent. But on the back of two groups of shareholders – one, the
old guard led by the 71-year-old chairman and founder Jorge Jardim
Gonçalves; the other, a younger group led by CEO Paulo Teixeira
Pinto – fighting to have the final say on the bank’s strategy,
Millennium shares have stumbled, losing almost all the gains made
since January.

The turmoil reached a critical point at the end of August when
Teixeira Pinto resigned, replaced by Felipe de Jesus Pinhal, deputy
chairman of the executive board. The departure of Teixeira Pinto
immediately called into doubt his long-term strategy for
Millennium, an ambitious plan focused on growing the bank’s
domestic franchise and its international operation by 2010. Soon
after taking over, Pinhal stressed that the Millennium 2010 plan
will have to be reviewed.

Overall, Millennium’s international operation has grown much more
quickly than its domestic business. Interim net income from
international operations grew 40 percent compared to 6 percent for
Portugal; fee income from cards declined 3.5 percent domestically
but increased 60 percent internationally.

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The manoeuvres have been described alternatively as a shareholder
revolt and a crisis of the management model. “It is almost a
dispute between father and son,” said Ricardo Valente, CEO of
Private Value, a Porto-based wealth management firm. “There was
time that it seemed the new generation, led by Teixeira Pinto,
would prevail, but things took a turn.”

The failed, highly public bid for BPI has been seen as the ultimate
reason for Teixeira Pinto’s downfall – “the final straw”, according
to Valente. During the protracted bid process to acquire BPI,
Millennium presented a number of improved offers but was unable to
seduce the rival’s board and important shareholders such as Spain’s
La Caixa, Germany’s Allianz and Brazil’s Banco Itaú. The hostile
€5.32 billion ($7.2 billion) takeover bid failed after less than 4
percent of the target’s shareholders took up the offer.

According to some analysts, including Valente, the roots of the
conflict over Millennium’s strategy can be found further in the
past, after the failure of a bid to buy BCR, the Romanian bank, at
the end of 2005. “It was the first great setback to the strategy
presented by Teixeira Pinto,” he said.

The exit of Teixeira Pinto has not been enough to put an end to the
hostilities. One of the bank’s main shareholders, the Teixeira
Duarte construction group, presented proposals to change the
statutes that in practice are likely to reduce Gonçalves’s power at
the bank. Historically, according to Valente, Millennium is a bank
where the top management has always had the upper hand; Teixeira
Duarte and his allies have been trying to push forward reforms that
would give a bigger say to shareholders.

Likely to pay a price for the fiasco

Valente concludes that, sooner or later, the bank is likely to pay
a price for the fiasco, no matter how the current debate between
shareholders settles. “It seems to me that they’ve somewhat lost
their way recently. People have been too concerned about the
management model and have not focused on the business,” he

Millennium could be an attractive acquisition for a banking group
looking to set up shop in countries as diverse as Poland and
Angola. The bank has a firm retail presence in Poland, Turkey and
Greece, and the subsidiary it has created from scratch in Romania
is opening its doors to the public in October. BBVA and Santander
have been mentioned by the market as possible bidders; La Caixa,
the largest Spanish saving bank, is another.

A hostile takeover would face considerable hurdles, as Millennium’s
current statutes require that a buyer acquires at least 90 percent
of the shares plus one in order to clinch the deal. “The
anti-takeover clause is very strong,” said Valente. A reduction of
this requirement is one of the changes proposed by the group who
wants to change the bank’s statutes, he pointed out.

Ironically, another option is being mooted in Portugal: a merger
with BPI, which has recently increased its own share of
Millennium’s capital and declared that it now has a “strategic
interest” in the larger group. “If Millennium BCP doesn’t stay
alone, a merger with BPI seems to me the most likely alternative,”
Valente concluded.

In a report on Portuguese banks published on 9 October, investment
bank Keefe, Bruyette & Woods (KBW) cut its earnings estimates
for Millennium by 3 percent for 2007 and by 6 percent for the
three-year business plan (which targets 70 percent earnings per
share growth between 2006 and 2010). KBW said while “new CEO Filipe
Pinhal is likely to lead new initiatives to recover market share
and to accelerate productivity improvements”, it was unconvinced
about further merger and acquisition activity between Millennium
and BPI.