Banco BPM SpA, Italy’s third-largest bank, has rejected a €10 billion ($10.5 billion) takeover bid from UniCredit SpA, which aimed to create the country’s largest banking entity. Banco announced Tuesday that UniCredit’s offer undervalued its financial strength and future growth potential, adding that it intends to focus on its independent business strategy.

Offer Deemed "Unusual and Inadequate"

In a statement, Banco BPM criticized the bid, calling its conditions "unusual" and inadequate for reflecting the bank’s profitability and strategic opportunities. Banco also pointed to potential complications stemming from UniCredit's recent attempts to increase its stake in Germany’s Commerzbank AG.

“These conditions are rather unusual for transactions of this kind and, in the opinion of the board, do not reflect in any way the underlying profitability and additional potential for value creation for Banco shareholders,” Banco said.

The bank highlighted its commitment to executing its 2023–2026 business plan, which includes a proposed acquisition of Anima Holding SpA, an Italian asset manager.

Banco BPM rejects Unicredit bid : Terms of the Bid

UniCredit’s offer comprised 0.175 newly issued shares at €6.657 per share for each of Banco’s 1.5 billion shares, representing only a 0.5% premium over Banco’s recent stock price. Banco argued that this valuation fails to account for its “outstanding financial performance,” which it said has been widely recognized by the market.

Banco emphasized its competitive positioning, asserting that it ranks among “players with the best growth prospects in the current market.”

Strategic Concerns

The proposed deal could significantly limit Banco BPM's strategic flexibility, particularly regarding its Anima acquisition and planned investments in Banca Monte dei Paschi di Siena, the bank added. Banco also cited concerns over Italy’s passivity rules, which restrict actions that could obstruct takeover bids.

Implications for the Banking Sector

The rejection underscores the increasing prevalence of mergers and acquisitions (M&A) as European banks seek resilience amid regulatory pressures, low interest rates, and rising demand for fintech solutions.

“M&A activity in the banking sector is often seen as a way to bolster balance sheets and improve operational efficiency, but it also risks creating a more concentrated market dominated by fewer, larger institutions,” noted Ashwin Pillay, a senior associate at Charles Russell Speechlys LLP.

Banco BPM rejects Unicredit bid : Potential Banking Giant

Had the deal been accepted, UniCredit, with €803 billion in assets as of September, would have merged with Banco BPM’s €195 billion in assets to surpass Intesa Sanpaolo SpA as Italy’s largest bank. The combined entity would rank as Europe’s 14th-largest lender by assets, according to S&P Global Market Intelligence.

Next Steps

While UniCredit remains intent on expanding its operations, Banco BPM’s firm rejection suggests it will pursue growth independently. Both banks have declined to comment further on the matter.