In a coup that delighted its shareholders and wowed analysts,
Spain’s Santander has agreed to sell on Banca Antonveneta for €9
billion ($13.2 billion) to Italy’s Banca Monte dei Paschi di Siena
(BMPS) before it has even taken control of it as part of the
three-way break-up of former Dutch banking giant ABN AMRO
(see RBI 580).

Santander had valued Antonveneta at €6.6 billion when it
agreed to pay €19.9 billion for the Italian and Brazilian assets of
ABN AMRO. The Spanish group is retaining Antonveneta’s corporate
banking arm, Interbanca, which it separately values at about €800
million, resulting in a capital gain from the BMPS deal of more
than €3 billion. “It was simply an offer we could not refuse,”
Santander said in a statement.

Santander has now cancelled its planned €3 billion rights issue and
effectively turned its back on mass market Italian retail banking.
Its Santander Consumer Finance arm, which last year accounted for
about 16 percent of the bank’s group profit in continental Europe,
retains an interest in the Italian consumer finance market with a 6
percent market share – less than its 16 percent and 26 percent
market shares in Germany and Spain, respectively.

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According to analysts, BMPS has paid over the odds for Antonveneta,
pointing out that Antonveneta’s net profit for the first half of
the year was only €150 million.

Rating agencies responded by cutting BMPS’s rating and its shares
fell 11 percent to €3.70 on the day following the announcement of
the proposed purchase, giving it a market capitalisation of around
€9.2 billion – essentially the same value it has placed on
Antonveneta, a bank with half the number of branches.

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The bank is paying about €9 million per Antonveneta branch and
increasing its network to around 3,000 branches (1,000 from
Antonveneta), although it may need to sell up to 130 branches for
antitrust reasons. The deal will strengthen the market share of
BMPS in many regions of the prosperous north of Italy, where
management wanted to grow and its presence was marginal.

For BMPS, which rejected merger overtures from local rival
Capitalia earlier this year, the acquisition of Antonveneta will
increase its Italian retail banking market share to 9 percent from
6 percent and achieve its goal of being the country’s third-largest
bank after UniCredit and Intesa Sanpaolo.

It has targeted a 2009 net profit for Antonveneta above €700
million (including synergies). Investment bank Keefe, Bruyette
& Woods (KBW) is less positive and forecasts a 2009 net profit
figure of €496 million. “Antonveneta has been losing significant
market share over time, especially in the retail and small business
sectors [and] we think it will take significant time and managerial
efforts to improve its commercial performances,” said KBW.

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In October, BMPS reported third-quarter net income of €204.4
million, compared with €207.4 million a year earlier. At the bank’s
first investor day in July
(see RBI 576), BMPS’s chairman,
Giuseppe Mussari, in commenting on possible merger and acquisition
activity, said: “There is space for a third banking group [in
Italy] and we will create this by growth through our current
business plan and acquisitions at reasonable prices.”

BMPS has been courted by numerous domestic and international banks
as the Italian sector has taken part in rapid consolidation over
the past 18 months. BMPS had been seen to be resistant to deals,
mostly because its controlling shareholder is a local charitable
foundation keen to preserve the independence of the bank.

p


Takeovers

Italian banks were involved in $94 billion of takeovers in 2006 and
another $71.2 billion this year, according to data provider
Bloomberg. That compares with $8.8 billion of banking
deals in the UK and $4 billion in Germany last year.

Santander, which was regarded by many analysts as benefiting the
most from the carve-up of ABN AMRO, has managed to make a “great
deal much better” in the opinion of KBW.

According to the chairman of Santander, Emilio Botín, the purchase
of Antonveneta “wouldn’t give us sufficient size to adequately
develop our business without making significant additional
investments”. Santander’s CFO, Jose Antonio Alvarez, said: “From
the very beginning, we knew that Italy was less attractive than
Brazil.”

Alvarez added that the bank had no more acquisition plans at the
moment and estimated that the return on investment from the ABN
AMRO deal would jump to 19 percent by 2010 from 13 percent
previously.