A public response was issued on Monday by Monte dei Paschi di Siena (MPS) in defense of its proposed acquisition of Mediobanca, following criticisms raised by a prominent governance advisory firm. It was stated by MPS that the execution risks tied to the deal would be minimal, primarily due to the limited overlap between the two institutions’ business models. This clarification was provided as the bank sought to address doubts surrounding the viability and strategic logic of the transaction.
The critique had been delivered on the preceding Friday by Institutional Shareholder Services (ISS), which had advised MPS shareholders to vote against a proposed share issue necessary to finance the acquisition. That vote had been scheduled for April 17, during the bank’s general meeting. While the governance adviser acknowledged that up to 3.3 billion euros (approximately $3.6 billion) in additional value could potentially be generated by the merger, skepticism had been expressed regarding the feasibility of achieving such gains. The challenges associated with post-merger integration had been cited as a primary concern, along with the differing corporate cultures and operational approaches of the two banks.
MPS had emphasized in its official communication that the rationale behind the bid was rooted in a strategic effort to construct a more resilient and diversified banking group. It had been explained that, by bringing together complementary business lines, a broader and more balanced source of revenue could be established, thereby enhancing the group’s ability to navigate what had been described as an increasingly demanding landscape for European financial institutions.
Since its state-led rescue in 2017, Monte dei Paschi had undergone significant restructuring and had successfully returned to profitability. Under the leadership of Chief Executive Luigi Lovaglio, who had assumed the role in 2022, the Tuscan bank had reestablished its capacity to pay dividends, signaling a turnaround in its financial health and governance. The bank’s traditional focus had remained on retail banking, where it held deep regional ties and a longstanding presence.
In contrast, Mediobanca had pursued a path of business diversification under the long-serving CEO Alberto Nagel. The Milan-based bank had expanded its reach into consumer finance and wealth management while maintaining its historic strengths in corporate and investment banking. A notable portion of Mediobanca’s annual profits had been derived from its strategic shareholding in insurer Generali, of which it owned approximately 13%. This holding had been viewed by many analysts as a core asset contributing to Mediobanca’s market valuation.
In its response to ISS, MPS had pointed out that the highly complementary nature of the two banks’ business structures was expected to ease the integration process. Because there had been little overlap in their respective operations, it had been argued that the risk of disruption would be significantly lower than in typical mergers where similar business units are combined. It was asserted by MPS that fewer operational adjustments would be necessary, thereby reducing the time, cost, and complexity normally associated with mergers and acquisitions.
Moreover, in addressing the concerns raised about the relative sizes of the two institutions, MPS had noted that its banking operations were, in fact, larger than those of Mediobanca when measured by total assets. Although Mediobanca’s market capitalization had appeared greater, much of its valuation had been attributed to its investment in Generali. This clarification had been provided to allay concerns that MPS, as the acquiring party, might face difficulties managing a target perceived as larger or more dominant.
Despite these assurances, ISS’s recommendation had underscored broader investor apprehensions regarding the potential cultural and strategic misalignment between the two entities. The two institutions had been shaped by distinct histories, regional focuses, and customer bases. While MPS had maintained its roots in traditional banking services to the public, Mediobanca had cultivated a more investment-oriented identity, engaging in complex financial services and managing large institutional relationships.
The pending shareholder vote on April 17 had therefore taken on heightened importance, not only for the fate of the proposed merger but also for the future strategic direction of MPS. It remained to be seen whether investors would be persuaded by the bank’s argument that the proposed deal, while ambitious, had been designed with prudence and risk mitigation in mind.
The outcome of this acquisition bid was expected to serve as a litmus test for how traditional European banks navigate consolidation pressures in a shifting regulatory and economic environment. While MPS had expressed confidence in the compatibility of the merger, the ultimate judgment would rest in the hands of shareholders and their perception of both the risks and rewards involved.
