Commissione Nazionale per le Societa e la Borsa (Consob), Italy’s stock market regulator, has never enjoyed much of a name – more sheep than watchdog. But it found its bark on May 11 when it ruled that Banca Popolare di Lodi (BPL), a medium-sized institution in Lombardy, had been in league with other investors in an attempt to prevent Banca Antonveneta, a medium-sized bank in Italy’s northeast Veneto region, from falling into the hands of Dutch giant ABN AMRO.
There had, said Consob, been a hidden shareholder agreement that began in November last year when BPL held a modest stake of about 1% in Antonveneta. Digging into share dealings, Consob discovered that BPL had financed friendly investors in purchases of Antonveneta’s shares and that by February these investors had accumulated more than 22% of the share capital of their target. So far, so murky, but, thanks to Consob’s efforts, beams of light have been shed on the whole affair.
ABN AMRO, BPL and its allies, and Antonveneta were not the only principal characters in this banking drama, however. The Bank of Italy, the banking supervisor, also played an important part. The Dutch bank had informed it on March 18 that it intended to launch a bid for Antonveneta, a bid formalised at the end of that month. Yet, as a leaked document from the Bank of Italy shows, BPL had already been authorised on February 14 to increase its stake in Antonveneta to 14.9%. And on April 12 the Bank of Italy cleared the way for BPL to strengthen its position by authorising a further increase to 29.9%, just below the threshold that triggers bids in Italy.
The waiting game
Little wonder that ABN AMRO was upset: with 12.7% of Antonveneta, it had been the biggest single shareholder at the beginning of the year. The Bank of Italy, headed by governor Antonio Fazio, seemed to be playing by its own rules and slanting the playing field. Italy’s central bank kept the Dutch bank waiting until April 27 before allowing it to take its shareholding in Antonveneta to 29.9%.
And little wonder that ABN AMRO protested loudly and that its lawyers were hard at work. Aiming to thwart a shareholder-blitz at Antonveneta’s annual shareholders’ meeting, they had asked the regional administrative court in Rome to suspend the Bank of Italy’s authorisations that allowed BPL to lift its stake in Antonveneta to 29.9%. All to no avail. By April 30, when Antonveneta’s shareholders met in Padua, BPL and its allies had acquired a stake big enough to seize control in the boardroom.
EU steps in
The EU soon became concerned about the situation. Competition commissioner Neelie Kroes and internal market commissioner Charlie McCreevy wrote to the Bank of Italy on April 27. Ms Kroes’ letter sought clarification about, among other things, how and why the central bank gave BPL the green light while dragging its feet on its decision with ABN AMRO.
Mr McCreevy’s letter drew Mr Fazio’s attention to concerns about the rules and administrative practices governing the purchase of stakes in companies operating in Italy’s financial sector. It reminded the Bank of Italy’s governor that the EU requires that any measure impeding the exercise of fundamental freedoms must be non-discriminatory, proportionate, provide certainty from a legal point of view and follow transparent procedures.
So a straightforward bank takeover – a friendly offer of €25 per share by ABN AMRO accepted by Antonveneta’s directors before they were ousted – has turned into a grand imbroglio. What happens next?
Consob’s ruling that BPL acquired an influential stake in Antonveneta thanks to its involvement in a concert party led the market regulator to require that BPL should make a full all-cash bid. On April 29, BPL had launched a paper offer for Antonveneta’s shares, a bid that most analysts considered to fall short of ABN AMRO’s cash offer. As The Banker went to press, BPL had left its paper offer on the table but prepared a cash bid of €24.2 per share.
Whatever Antonveneta’s destiny after legal experts have finished their work and the bank’s shareholders have made their choice, Italian banking will probably not be the same again. Events during the first five months of the year have left their mark on those directly involved. They also provide pointers for the future for those who looked on.
Future consolidation
What does it mean for banking consolidation? Three years ago, Mr Fazio underlined his support for the banche popolari (people’s banks) like BPL and Antonveneta and for mergers among them. As for concentration elsewhere, he noted: “We believe that the process of concentration at the top of our banking system, apart from one possible important operation, is complete.” Although not named, the two institutions destined for that operation were widely thought to be Banca Nazionale del Lavoro (BNL) and Monte dei Paschi di Siena.
As The Banker went to press, BNL was the subject of a bid by Spain’s Banco Bilbao Vizcaya Argentaria (BBVA), the biggest single shareholder with a 14.7% stake. BBVA had bought into the Rome bank when BNL was privatised and the treasury ministry anxiously sought buyers. Despite the opposition of a group of shareholders, BBVA was thought the likely winner with an all-paper offer that has the support of the bank’s board. Despite Mr Fazio’s words in May 2002, further consolidation among Italy’s biggest banks, to match the size of Europe’s big banks, now seems more likely.
The takeover battles for Antonveneta and BNL have highlighted the potential conflict that occurs when shareholders in banks are also borrowers from those same institutions. This issue is not confined to BPL and BNL, where a group of property magnate shareholders was opposing BBVA. It happens elsewhere in Italian banking. Fiat, an important customer of Sanpaolo IMI, but whose main shareholder is also a major shareholder of the bank itself, is one example.
Playing by the rules
Intervention by the European Commission has shown that, whatever their aspirations to act as investment banks in directing mergers and acquisitions within their countries’ borders, national central banks may not write the rules as they please. Whether or not the administrative and legal red tape turn out to be deterrents is another matter.
The month of May has revealed a clear winner and a clear loser among Italian state institutions. The winner is Consob which, by biting a cabal of bankers and businessmen who stepped over the line, has shown the courage to uphold laws and protect minority shareholders.
The loser is the Bank of Italy whose authority has been weakened. The leaked document showed that the central bank appeared to encourage BPL to form a concert party. Level playing fields aside, what many observers find hard to understand is why, if an Italian partner was wanted for Antonveneta, the Bank of Italy did not choose a strong bidder rather than BPL, whose capital ratios are dangerously low.
