Italy's Banco BPM has rejected a takeover bid from UniCredit, saying the current offer undervalues the lender.
In a statement, Banco BPM said the bid from UniCredit, the larger Italian lender, "does not reflect in any way the profitability and further potential to create value for Banco BPM shareholders".
The statement came after a board meeting on Tuesday, where Banco BPM officials discussed UniCredit's offer from Monday.
The meeting followed a surprise offer from UniCredit in which it announced it would offer 0.175 of its own shares for each share in Banco BPM, valuing the stock at €6.657 each.
Based on Monday's closing prices, UniCredit's offer values Banco BPM at around €9.6bn.
Tuesday's statement went on to say that UniCredit's offer was unsolicited. It reiterated that the board had full confidence in Banco BPM's current business strategy.
Concerns about expansion in Germany
The statement also underlined concerns about potential job losses, reduced competition in Italian banking, and mentioned UniCredit's possible expansion in Germany.
The lender has been increasing its stake in Germany's Commerzbank, a move facing fierce opposition from Berlin.
Many in Germany fear a merger could lead to job cuts and the hampering of lending to small and medium-sized businesses.
Banco BPM's press statement argued that a potential UniCredit takeover "exposes…stakeholders to the risk associated with the outcome of the expansion initiatives launched by UniCredit in Germany", diluting its exposure to high-growth regions.
Political opposition
UniCredit's bid for Banco BPM has not only ruffled feathers within the country’s banking sector - but also rattled politicians.
Economy Minister Giancarlo Giorgetti has said that Italy may use its golden power legislation to block the takeover.
This mechanism allows the Italian state to limit or stop transactions involving assets of national strategic importance.
The government in Rome had been pushing towards forming a major banking group around Monte dei Paschi di Siena (MPS), a move complicated by UniCredit's bid.
Banco BPM this month bought a 5% stake in MPS, perceived as a potential prelude to a merger.
The government is slowly exiting from MPS after a 2017 bailout, recently cutting its stake from 26% to around 11%.
Also this month, Banco BPM launched a €1.6bn offer to buy asset manager Anima Holding, seeking to diversify its revenue streams as interest rates fall. Anima owns shares in MPS.
Another player in the takeover drama is French bank Crédit Agricole, Banco BPM's main partner.
According to Italian newspaper Il Sole 24 Ore, the French lender may have increased its stake from around 9% to 19% through equity swaps.
Crédit Agricole needs regulatory approval to hold more than a 10% stake, meaning this development could complicate a potential UniCredit deal.