France’s Credit Agricole makes $875 million buyout offer for Italy’s Creval

PARIS/MILAN (Reuters) – France’s Credit Agricole made an offer to buy third-tier Italian lender Creval for 737 million euros ($875 million) on Monday, joining a wave of consolidation in the country’s banking sector.

FILE PHOTO: A Credit Agricole sign is pictured on a building of the bank in Geneva November 26, 2014. REUTERS/Denis Balibouse

France’s No.2 bank had been considering expanding in Italy, its second biggest market, and Creval and larger rival Banco BPM had both been tipped as potential targets.

Credit Agricole Italia will offer 10.50 euros per Creval share, a 21.4% premium on Friday’s closing price. By 1402 GMT shares in Creval had jumped 22% to 10.6 euros. Credit Agricole shares rose 2.8%.

The buyout offer is expected to launch in March or April and is subject to a two-thirds minimum acceptance threshold by Creval shareholders.

Intesa Sanpaolo’s surprise takeover of rival UBI earlier this year has prompted rivals in Italy to start exploring potential alternative deals.

Credit Agricole Italia had held preliminary talks with Banco BPM, Italy’s No.3 bank and a long-standing commercial partner, but they stalled, sources had said.

It had also recently doubled a 5% Creval stake acquired in 2018 as part of a deal to sell insurance products.

“We were in an ambiguous situation, we had this long-term ‘bancassurance’ accord but it was difficult to pursue synergies,” Credit Agricole Italia CEO Giampiero Maioli told a press briefing.

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Maioli said plans for the buyout offer had emerged over the past month and had been discussed with the European Central Bank and Italian authorities, including the Treasury with whom relations were “excellent.”

The deal may benefit from tax breaks for mergers which Italy has drafted to ease the re-privatisation of bailed-out Monte dei Paschi, a scheme which Mediobanca Securities analysts sees as “a game changer for consolidation.”

“We’ve always taken part in Italian (banking) consolidation and facilitated it,” Maioli said. “This new investment … is a testament to our degree of confidence in the country,” he said.

Mergers are also attractive because of discounted bank valuations, which translate into paper profits for buyers.

The offer values Creval at 0.4 times its tangible assets, a level which analysts said was “good news” for Italian banks while still leaving a 1 billion euro earnings boost which Credit Agricole Italia will use to cover clean-up and restructuring costs.

The unit plans to launch a share issue to rebuild its capital buffers, fully guaranteed by Credit Agricole.

Maioli said there were no other merger discussions in Italy.

He said the Creval deal would yield 150 million euros a year in savings before taxes, leading to a return on equity above 10% in 2023 for the combined entity.

The group would have a 5% market share nationwide, with more than two thirds of branches concentrated in the wealthy north of Italy.

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The 737 million euro offer for Creval includes the outlay for the agreed purchase of a 5.4% Creval stake from London-based fund Algebris, as well as the acquisition of a 9.8% holding from the group’s Credit Agricole Assurance unit.

Credit Agricole entered Italian retail banking in 2007 when it bought northern banks Cariparma and Friuladria. In 2016, its asset management arm Amundi bought rival Pioneer Investments from UniCredit for 3.6 billion euros. The following year the French cooperative group acquired three small failing banks.

“We keep a long-term view and don’t get scared if Italy’s debt risk premium goes up and down,” Maioli said. ($1 = 0.8421 euros)

Reporting by Matthieu Protard and Sudip Kar-Gupta in Paris and Andrea Mandala in Milan; Editing by Kirsten Donovan and Susan Fenton


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