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Monday May 21, 2007

Boards Say Yes to Unicredit-Capitalia Merger

Green light for new superbank. Prodi says Italy needs big financial institutions. New bank will be the seventh-largest in Italy with 9,200 branches. Three Capitalia brands to be kept.
ROME – Capitalia chair Cesare Geronzi admitted thatthe merger with Unicredit “is the operation I’ve always wanted”. He said that he had waited for the bank’s CEO Alessandro Profumo to “take some time off” before putting forward plans for mutual expansion. The opportunity finally arrived and what emerged was “bigger than envisaged:an amazing group”.
 
Mr Geronzi is very pleased with the marriage. At the media briefing to present the new bank after the respective board meetings, an equally enthusiastic Mr Profumo was sitting beside him. Mr Profumo said he had analysed the merger plan without much conviction but then “something clicked”, a click that was missing during negotiations with Société Générale. Now, Mr Profumo views the merger positively, as procedures start to pave the way for the shareholders’ meetings in July or August that will sanction Capitalia’s incorporation into Unicredit before the end of the year. “Rome may be the Eternal City but it’s not the end of the line”, he pointed out, quoting Unicredit’s chairman Dieter Rampl, who was sitting on his left.It fell to Mr Rampl to illustrate the new group’s organisation. He described a merger that will create the biggest bank in the Eurozone, the second-largest in Europe and the seventh-largest in the world with a market capitalisation of 96.7 billion euros and 9,200 branches, of which 5,000 are in Italy. The new group will have a 16% share of the domestic market and more than 50% of its revenue will be generated outside Italy.The three Capitalia brands, Banca di Roma, Banco di Sicilia and MCC, will be maintained.While there may be redundancies and reshuffling for the 170,000 employees, these will be implemented “with the utmost transparency and consensus”.
At the media briefing, the two top executives embodied the friendliness that is said to have characterised the negotiations at every stage.Mr Geronzi mentioned the approval of the merger expressed by the minister for the Economy, Tommaso Padoa-Schioppa, and the governor of the Bank of Italy, Mario Draghi.Prime Minister Romano Prodi was also upbeat yesterday when he stressed “the importance of two groups like Intesa-Sanpaolo and Unicredit-Capitalia for Italy’s economic development”, replying “they are not monsters” to journalists who asked him.Mr Geronzi also assured the mayor of Rome, Walter Veltroni, that“the capital will have a group with five times the fire power of the old one”.
 
The Capitalia chairman went on to discuss the reasons for the breakdown of negotiations with Banca Intesa a year ago.“The no to that alliance did not come from me”, he said before claiming responsibility for the suspension of later talks with ABN AMRO.Mr Geronzi also pointed out that the merger of Capitalia and Unicredit “is not an operation for power.Quite the reverse”. In fact, he announced the consignment “in the course of this month” of the Generali shares held by Capitalia to a convertible loan service.Unicredit will do the same in 2008 when the debenture falls due. Concerning Mediobanca, Mr Geronzi said “we will come down below 10%”. Again regarding Generali, Mr Geronzi said he agreed with the chairman, Antoine Bernheim, on the defence of the company’s “Italianness”. He claimed that “at present, it is not the target of an attack” and that, to the contrary, “it is time [Generali – Ed.] started to grow”. The new group, whose leading shareholder will be Cariverona with 3.9%, will be called Unicredit Group and will be based at Piazza Cordusio in Milan.The group’s legal domicile will be transferred from Genoa to Rome.Mr Profumo will continue to be the group’s managing director and Mr Geronzi will be deputy vice chairman with a mandate for shareholdings (Mediobanca, Generali, RCS and Pirelli), at least until he is appointed to another position. Who is going to lead Mediobanca ?Mr Geronzi side-stepped the question but in his opinion there is a replacement ready and waiting at Unicredit in Berardino Libonati.The Capitalia CEO, Matteo Arpe, is out of contention. His resignation takes effect from 31 May (“I stepped down for the good of the bank”, wrote Mr Arpe in his letter of resignation). In the meantime, the new group’s corporate governance arrangements have already been decided. Four members of the Capitalia board (Mr Geronzi, Salvatore Ligresti, Donato Fontanesi and Salvatore Mancuso) will join the board of Unicredit Group.
 
The swap ratio for the merger has been fixed at 1.12 Unicredit shares for each Capitalia share,valuing shares in the Rome banking group at about 8.40 euros, in comparison with the 7.97 euros at which they were trading when the Milan stock exchange last closed.
 
Federico De Rosa