Portugal’s Banco Português do
Investimento (BPI) has proposed a friendly merger with the
country’s largest private-sector banking group, Millennium BCP, in
a reversal of BCP’s €5.32 billion ($7.2 billion) hostile bid for
BPI. That bid failed in May after less than 4 percent of BPI’s
shareholders took up the offer.

A statement from BCP in response to the proposal said: “The
executive board considers inadequate and unacceptable the terms of
the offer presented [as it] does not create significant value for

BCP has, however, said that it is prepared to begin talks with

There has been renewed market discussion regarding a BCP-BPI tie-up
(see RBI 580). BPI has
increased its own share of BCP’s capital and now owns 6.26 percent
of BCP (its employees pension fund controls a further 2.6 percent)
and has declared that it now has a “strategic interest” in the
larger group.

If successful, a merged BPI-BCP would create a Portuguese group
with a market capitalisation of around €16.7 billion, making it the
Iberian Peninsula’s third-largest bank after Spain’s Santander and
BBVA. BCP and BPI together have assets of €125 billion, 1,500
branches and 18,000 employees.

BPI has offered BCP a 1:2 share swap, valuing BCP at around €12.1
billion. The merger proposal, if accepted by BCP, would result in
BCP shareholders controlling 70.4 percent of the new bank and BPI
29.6 percent.

However, the executive committee of the new bank – to be known as
Banco Millennium BPI – would have a majority of five to four in
favour of BPI, effectively giving them management control.

“What we want to create is a Portuguese bank that is independent,
with an international reach and with the decisions being made here
in Portugal,” said BPI’s chief executive, Fernando Ulrich, in a

According to investment bank Keefe, Bruyette & Woods, a merger
would generate around €146 million net synergies after tax in three
years (12 percent of combined costs and 2 percent revenue
attrition), adding some 8 percent to 2009 net profits.

Ulrich has said he does not intend to sell any assets in the new
bank other than those required by the Portuguese competition
regulator to approve the merger.

Other bidders

A counter bid for BCP from another suitor cannot be ruled out but
would face considerable hurdles, as BCP’s statutes require a buyer
acquires at least 90 percent of the shares plus one in order to
succeed. BBVA and Santander have been mentioned by the market as
possible bidders, as has Banco Sabadell.