26 July, 2010

Italy Bank Mergers & Acquisitions (Intesa Sanpaolo)

Photo: A Banco di Napoli branch in Italy.  Banco di Napoli is a subsidiary of the Intesa Sanpaolo group and is the group's main operating division and brand in southern Italy.

With special thanks to my Dutch friend Rob van Kan, who took this photo and granted me the permission to use it here.  You can view Rob's  photostream via this link:


Intesa Sanpaolo SpA

Intesa Sanpaolo was created in 2007 when Banca Intesa and Sanpaolo IMI combined. Banca Intesa traces its roots to Cariplo SpA, Banco Ambrosiano Veneto and Banca Commerciale Italiana.

Cariplo SpA

Cassa di Risparmio delle Provincie Lombarde was established in 1823 in Lombard, which was then part of the Austrian Empire. The bank, whose name means the Savings Chest [Bank] of the Province of Lombard, initially focused on promoting household savings. The bank began to offer agricultural, industrial and commercial banking during the second half of the 19th century. Cassa di Risparmio delle Provincie Lombarde was a major force in providing much-needed capital to industries in northern Italy during World War I, as well as the reconstruction of Milan after World War II. In the 1950's, the bank created a specialized small-business lender called Mediocredito Lombardo.

Like Italy’s numerous other savings banks, Cassa di Risparmio delle Provincie Lombarde was a state-owned regional credit institution with a socio-charitable mandate. This changed in 1990, when the long-awaited banking reform legislation (the Amato Act) was passed, requiring the savings banks (casse di risparmio) to separate their banking operations from the socially-mandated, non-profit charitable foundations. The Amato Act also forced the savings banks to convert to the joint-stock (i.e. public limited company) form. Initially the shares of these newly-spun-off banks were still held by the social foundations, but the Ciampi Act in 1998 prescribed that the majority shareholdings of the banks held by the social foundations to be sold off gradually. The goal was to ensure a transition towards a purely market-driven, private-sector banking industry away from the former dual objectives of providing banking services and promoting social causes. The phenomenon under which for-profit, market-driven joint-stock banks dominating the banking sector is sometimes referred to as the Anglo-American system.

In 1991, Ente Cassa di Risparmio delle Provincie Lombarde spun off Cassa di Risparmio delle Provincie Lombarde and merged it with IBI to create a new banking group named Cariplo SpA. Parent organization Ente Cassa di Risparmio delle Provincie Lombarde then renamed itself the Fondazione Cariplo and focused solely on doing social and charitable work.

Banco Ambrosiano Veneto SpA (also known as Banco Ambroveneto)

Banco Ambrosiano Veneto can trace its history to two banks named Nuovo Banco Ambrosiano and Banca Cattolica del Veneto. It is worth noting that the original Banco Ambrosiano was involved in one of Italy and Vatican’s most mysterious and infamous political scandals in the 1980s. The bank’s senior management and some top Vatican officials were implicated to have close ties with the Mafia. In 1982, Banco Ambrosiano’s deposed chairman, Roberto Calvi, disappeared and was found dead in London days later. It was believed that he had been murdered by the Mafia. The bank, then Italy’s No. 2 private-sector bank, collapsed soon after under losses of USD $1.3-billion.

In 1989, the rebuilt Nuovo Banco Ambrosiano and Banca Cattolica del Veneto merged to form the Banco Ambrosiano Veneto (BAV). Between 1991 and 1995, BAV expanded nationwide by taking over other Italian banks including Banca Vallone di Galatina, Citibank Italia, Società di Banche Siciliane, Banca Massicana di Sessa Aurunca, and Banca di Trento e Bolzano. BAV also acquired Caboto to expand into the securities business in Europe.

Banca Commerciale Italiana SpA

Banca Commerciale Italiana (BCI) was established in 1894 in Milan with German (Deutsche Bank, Dresdner Bank), Austrian and Swiss (Credit Suisse) capital. Initially, BCI specialized in providing long-term corporate loans to the shipping, steel, textiles and electricity industries in northern Italy. In 1911, BCI became the first modern Italian bank to have a branch abroad when its London branch opened. Since then and for much of the 20th century, BCI had always had the largest international presence of all Italian banks. During the early 20th century, BCI also acted as a merchant bank and held direct equity investments in various industrial, non-banking companies.

The New York Stock Market Crash in 1929 jolted the global economy, including Italy. The entire Italian banking system became so distressed that in 1933, it was on the verge of collapse. BCI, along with fellow powerhouses Banco di Roma and Credito Italiano (both evolved into today’s Unicredit) were nationalized and became part of the state agency IRI (Istituto per la Ricostruzione Industriale). In 1937, the three banks were declared banca d’interesse nazionale (bank of national interest) due to their national importance.

Following the devastation of World War II, these same three banks created Mediobanca in 1944, a specialized lender providing medium- and long-term financing to rebuild Italy’s manufacturing industries. Mediobanca’s direct equity investments in many of Italy’s most well-known industrial, commercial and financial services concerns made it a secretive, powerful and manipulative deal-maker in orchestrating mergers, blocking unwanted corporate advances, forcing business break-ups and even reinforcing oligopolies for the next 60 years.

After World War II, BCI re-employed its former international expertise and focused on trade finance, while also gradually expanded into agricultural and mortgage loans. Italy, however, suffered from chronic high inflation and lackluster growth during most of the second half of the 20th century. Its banking sector was backward, over-staffed, bureaucratic and corrupt. The Italian state imposed strict restrictions on lending, money supply, foreign exchange and international expansion until the late 1980s. Bureaucracy and a chronic lack of capital hampered the expansion of Italian banks, including BCI. This challenge was partly relieved, when the state-controlled IRI sold a minority stake of BCI to the public in 1969, though the bank was not fully-privatized until 1994.

In 1982, BCI acquired Litco Bancorporation for USD $93-million. Litco was the parent company of the Long Island Trust Co. in New York. Merely five years later, however, BCI sold Litco (by then it had been renamed North American Bancorporation) to the Bank of New York.

In 1988, BCI made a USD $755-million bid for 51% of Irving Bank Corp., which was then trying to fend off a hostile bid from the Bank of New York. However, BCI’s bid for Irving Bank was blocked by the Federal Reserve due to regulatory reasons, and the Bank of New York subsequently acquired Irving Bank.

By the early 1990s, the Italian government finally decided to get out of the business of running the banking industry. BCI was fully privatized in 1994, the centenary of its establishment. The bank’s privatization was mired in controversies, however, when powerful Milan merchant bank Mediobanca organized a group of institutional allies to gain majority control of BCI without paying a meaningful premium that the government was hoping for.

Almost immediately, the country’s banks entered into a frenzy of consolidations to improve efficiency and increase their market coverage. Later in 1994, BCI made an offer to buy Banco Ambrosiano Veneto (BAV) for USD $1.13-billion. However, due to fragmentation of cross-institutional shareholdings in Italy’s industries at the time, winning all institutional shareholders’ acceptance to tender their shares was extremely difficult in those early days of consolidation, and many banking merger proposals ended up as “false starts.” In the end, BCI failed to acquire BAV. Ironically, in 1999, the roles of the “hunter” and the “prey” were reversed when Banca Intesa, the result of the combination between Cariplo and BAV, acquired control of BCI.

Recent transaction(s):

  • In 1997, Banco Ambrosiano Veneto acquired Cariplo SpA to form Banca Intesa SpA for between ITL 8-trillion to 9-trillion (USD $4.8-billion to $5.5-billion). Fondazione Cariplo’s agreement to sell Cariplo SpA to Banco Ambrosiano Veneto was a setback for the powerful Mediobanca, which had been engineering a combination between Banca Commerciale Italiana (BCI) and Cariplo.
  • In March 1999, UniCredito Italiano SpA made a hostile bid to take over Banca Commerciale Italiana for USD $16-billion. However, Mediobanca, which had effective control over BCI, opposed UniCredito Italiano’s proposal and was busily engineering a merger between BCI and Banca di Roma, much to the opposition of Italy’s business and political leaders, as it would give the already manipulative Mediobanca even more control on the banking sector.
  • When it became clear that the government would block Mediobanca’s plan to combine BCI and Banca di Roma, Mediobanca orchestrated a sale of 70% of BCI to Banca Intesa in July 1999 for Eur 10.6-billion (valuing all of BCI at Eur 14.6-billion, USD $15.1-billion). The sale essentially resurrected Mediobanca’s 1997 failed attempt to combine BCI with Cariplo SpA. (Banca Intesa is the result of the merger between Banco Ambrosiano Veneto and Cariplo SpA.)
  • In 2000, Banca Intesa offered to buy the 30% of BCI that it didn’t already own. BCI was fully incorporated into Banca Intesa in 2001 with the new name IntesaBci. In 2003 though, the bank dropped “Bci” and resumed using its old name Banca Intesa.
  • Also in 2002, IntesaBci sold its 25% stake in Banca Carime to Deutsche Bank for Eur 400-million.
  • Later in 2002, IntesaBci sold its 69.6% stake of Banco di Chiavari e delle Rivera Ligure to Banco Popolare di Lodi (now Banca Popolare Italiana) for Eur 405-million.
  • In April 2003, Intesa sold its 94.6% stake in Banco Sudameris Brasil to ABN AMRO’s Banco ABN AMRO Real for Eur 648-million (BRL 2.29-billion).
  • During the Argentine economic crisis in 2003, Intesa gave up its Banco Sudameris Argentina to locally-owned Banco Patagonia. Intesa would retain a 19.95% stake in the enlarged Banco Patagonia-Sudameris, which would have 100 branches following the merger. Later in 2003, Intesa also sold its local units in Uruguay and Colombia.
  • In 2005, Intesa agreed to buy between 75% and 100% of Delta Banka of Serbia-Montenegro for between Eur 277-million and Eur 370-million. With 144 branches, Delta Banka was the country’s No. 2 bank. Delta Banka was subsequently renamed Banca Intesa Beograd.
  • Also in 2005, Intesa bought Bosnia Herzegovina’s ABS Banka for Eur 12-million. ABS Banka had 41 branches.
  • Also in 2005, Intesa bought 75% of Russian small-business lender KMB Bank for Eur 90-million. KMB had 50 offices.
  • In late 2005, Intesa transferred Banco Wiese Sudameris to Bank of Nova Scotia’s 35%-owned Peruvian unit Banco Sudamericano in a complex deal. Intesa would own 19.95% of the enlarged Banco Sudamericano, which would have 130 branches following the merger.
  • In 2006, Intesa bought 81% of Bosnia Herzegovina’s UPI Banka for Eur 37-million. UPI Banka had 16 branches.
  • In late 2006, Banca Intesa announced a friendly bid for Sanpaolo IMI SpA for Eur 29.6-billion (USD $37.5-billion). This deal combined Italy's 2nd and 3rd largest banks. Thanks to a rise in Banca Intesa's share prices, the value of the takeover had risen to Eur 31.5-billion (USD $40.0-billion) by late 2006.
  • Later in 2006, Banca Intesa agreed to sell 652 branches in northern Italy to France's Crédit Agricole for Eur 5.93-billion (USD $7.44-billion). Crédit Agricole, a significant shareholder of Banca Intesa, supposedly threatened to vote against the Intesa-Sanpaolo IMI merger proposal unless a side deal was signed to give the French bank a sizeable presence in Italy.
  • In 2006, Intesa bought 67% of LT Gospodarska Banka (LTG Banka) for Eur 11-million. LTG had 25 offices in Bosnia Herzegovina.
  • In 2007, Intesa Sanpaolo bought 19.99% of China’s Qingdao City Commercial Bank for USD $135-million.
  • Also in 2007, Intesa Sanpaolo sold 198 branches to four regional rivals for Eur 1.9-billion.
  • In 2008, Intesa Sanpaolo bought the 81% of CariFirenze that it did not already own for Eur 4.42-billion (USD $6.54-billion) in stock and cash. Florence-based CariFirenze had 547 branches in Italy and 19 in Romania. As part of the agreement with Italy's anti-trust authorities, Intesa Sanpaolo promised to sell off 29 branches to other financial institutions.
  • In 2008, Intesa Sanpaolo sold its 49% stake in consumer finance business AGOS SpA to JV partner Crédit Agricole for Eur 546-million.
  • In 2008, Intesa Sanpaolo bought Ukraine's JSC Pravex-Bank for Eur 504-million (USD $747-million). JSC Pravex-Bank operated 560 branches in Ukraine, the sixth largest network in the country.
  • In 2008, Intesa Sanpaolo sold its remaining 19.95% stake in Scotiabank Peru to the Bank of Nova Scotia. Terms of the deal were not announced but the Globe and Mail reported it to be worth about Eur 129-million (USD $199-million).
  • In June 2009, Intesa Sanpaolo unwound its four bancassurance joint-ventures to acquire full ownership. The four JVs affected were: Intesa Vita, EurizonVita, Centrovita Assicurazioni and Sud Polo Vita.
  • Also in 2009, Intesa Sanpaolo agreed to sell its 50% stake in Italy’s No. 2 consumer finance specialist Findomestic to partner BNP Paribas. Intesa Sanpaolo immediately sold 25% of Findomestic for Eur 500-million. The remaining 25% stake would be sold between 2011 and 2013 for an estimated Eur 350-million to 650-million.
  • In December 2009, Intesa Sanpaolo sold its global securities servicing business to State Street Corp. for Eur 1.28-billion (USD $1.87-billion). The unit sold had Eur 343-billion in assets under custody and Eur 141-billion of assets under depository bank services.
  • In June 2010, Intesa Sanpaolo (Banca CR Firenze) bought 50 branches from rival Banca Monte Paschi di Siena for Eur 200-million.
  • Also in June 2010, Intesa Sanpaolo sold its 80% stake in Cassa di Risparmio della Spezia (which had 76 branches) and another 96 branches to Crédit Agricole for Eur 740-million.
  • In June 2017, in a deal brokered by Italian and EU authorities, Intesa Sanpaolo took control of the “good” (“least rotten”) assets of two Veneto-based banks that had collapsed. Under the arrangement, Intesa Sanpaolo bought the “good” assets of Veneto Banca and Banca Popolare di Vicenza for a symbolic EUR 1 (EUR 1 = USD $1.1182), with the Italian state subsidizing EUR 5.2-billion of capital immediately, plus committing to another EUR 12.0-billion of potential future state guarantee.

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