UniCredit SpA of Milan, Italy's biggest bank, has agreed to buy Capitalia SpA of Rome for $29.5 billion to cement its position in Europe's most profitable major market.
UniCredit, which would swap 1.12 shares for each share of Capitalia, said in announcing the deal Sunday that it would create the biggest bank by market capitalization in the 13 nations using the euro. The agreement values Capitalia's shares at about 5.5% above their price on May 18 before trading was suspended.
UniCredit has spent more than $25 billion on takeovers in the past two years under chief executive Alessandro Profumo. Capitalia is the largest remaining target in a market where lenders can charge some of the highest fees in Europe.
"It looks like their last chance in Italy," said Stefano Fabiani, who helps manage $350 million at Zenit Sgr of Milan and owns stock in UniCredit and Capitalia. "UniCredit aims to be a market leader in Europe, but first Profumo wants to close a chapter in Italy."
UniCredit said it plans to spend nearly $1.5 billion integrating its businesses after completing the Capitalia deal, which is set to close in the fourth quarter. It aims to generate $1.6 billion a year in cost cuts and revenue gains.
The acquisition would create "an Italian bank that will be big and a real global player," said Francesco Vercesi, who manages the equivalent of $80 million worth of shares at Cartesio Alternative Investments in Milan and owns UniCredit stock. "It's not buying Capitalia at a cheap price, but it's not overpaying for it."
The deal was approved by an investor group, led by ABN Amro Holding NV, that owns 31% of Capitalia and sets the company's strategy. ABN Amro owns about 9% of Capitalia, according to spokesman Jochem van de Laarschot, and would not be a part of UniCredit's board.
"The decision was unanimous," Giovanni Puglisi, who heads Fondazione Banco di Sicilia, said in an interview. The Banco di Sicilia foundation owns 3.2% of Capitalia.
Capitalia's chairman, Cesare Geronzi, would be the merged company's deputy chairman and head its executive committee. Fondiaria-SAI SpA, the Region of Sicily, and the Manodori banking foundation also would be named UniCredit directors, Vittorio Ripa di Meana, the chairman of the Capitalia investor group, told reporters in Rome.
Capitalia sought a merger with an Italian bank and discussed the project with UniCredit in the last two weeks, Mr. Geronzi said. Mr. Profumo said UniCredit may consider more acquisitions in Germany. He did not elaborate.
Capitalia's CEO, Matteo Arpe, 42, said he bowed to pressure from Mr. Geronzi to resign almost four years after becoming the youngest CEO at a major European bank and reversing a loss in 2002. He publicly feuded with Mr. Geronzi, 72, and rebuffed an attempt to fire him three months ago. On April 12 he was stripped of his influence over the company's merger strategy.
"Last Monday, the chairman told me about the important merger project," Mr. Arpe wrote in a letter released Sunday. Mr. Geronzi "told me the possibility was conditional on my availability to take a step back from the operational leadership of Capitalia."
Shares of Capitalia have gained about 52% since Mr. Arpe took over as CEO in July 2003. UniCredit's shares have gained 17% during that time.
