Oggi il Financial Times ha nuovamente bocciato l’operazione Intesa-Generali. Qui di seguito il commento, che mette nel mirino anche l’advisor di Carlo Messina, ceo Intesa: Andrea Orcel, capo dell’investment banking di UBS.
Intesa-Generali brings back nasty memories of ABN Amro disaster
Similarities in the deal should give management and investors pause for thought
Is that the sound of alarm bells ringing? To anyone with a faint heart and a corporate memory that stretches back a decade, there are some nasty parallels between Intesa Sanpaolo’s mooted acquisition of Generali and one of the worst M&A deals in history — Royal Bank of Scotland’s acquisition of ABN Amro back in 2007.
True, this deal is smaller. Insurer Generali has a market capitalisation of €24bn, so even if a premium is paid, any acquisition would be less than half the size of the €71bn ABN takeover. And it is domestic, making the combination simpler than the Anglo-Dutch deal of 10 years ago.
There are all the same five striking similarities, which should give management and investors pause for thought.
- The timing looks bad. Back in the autumn of 2007, when RBS pounced on its weak Dutch rival, the macro-environment was already turbulent. The US mortgage market was melting down, banks were finding it harder to fund themselves and Northern Rock had collapsed. Within months, Bear Stearns and Lehman Brothers would fail, too. Today’s environment, and the strength of bank balance sheets, is far healthier. Italy, though, is relatively weak. The banking sector is awash with non-performing loans. Intesa chief Carlo Messina sees that as an opportunity. His opposite number at Generali has lost his top two lieutenants and looks vulnerable.
- The adviser is the same. Andrea Orcel was Merrill Lynch’s top European rainmaker when he and a couple of colleagues dreamt up the RBS-ABN deal. Today he runs UBS’s investment bank, but still works as a deal adviser. Intesa-Generali would be one of his biggest takeovers.
- The design is similar. Like RBS-ABN, this is a complex buy-and-carve-up deal. While ABN was ultimately split between RBS, Santander and Fortis (with two of the three ending up bailed-out and nationalised as a result), Intesa’s plan would be to sell off Generali’s French and German operations to the likes of Axa and Allianz.
- The deal is hostile. In 2007, Barclays had been in friendly discussions with ABN, before RBS shouldered its way in with an unsolicited counter-offer — the hostile approach meant that due diligence was limited and relations were strained, further complicating an already ill-fated combination. The potentially high-risk nature of financial companies’ balance sheets makes them dangerous targets for hostile acquisitions.
- The combined group would be systemic. The €60bn-plus combined market capitalisation of Intesa-Generali is a long way short of the biggest financial groups. (RBS-ABN created the world’s biggest bank.) But the entity would probably still attract the attention of global regulators — and a capital surcharge commensurate with being a “systemically important financial institution”. Some critics highlight the concentration of government debt that would be held by the group (nearly €160bn) — more than 7 per cent of Italy’s outstanding sovereign bonds — albeit the majority is held as client investments, rather than on Intesa or Generali’s own account.
There are of course compelling arguments in favour of a deal, too. Besides all the usual cost savings that can accompany large-scale M&A, Intesa sees big “revenue synergies” — by distributing its products through the Generali advisory network, and selling Generali property and casualty insurance through bank branches. There may also be an opportunity for capital arbitrage, exploiting the so-called Danish Compromise, which allows Europe’s bancassurance companies — such as France’s Crédit Agricole — to double-count bank and insurance unit capital. The loophole is due to be closed in the coming years. But banks have been granted leniency, and Intesa is hoping it can benefit too, potentially lifting its already decent 12.8 per cent core equity tier one capital ratio by 2 percentage points.
The decision on which path to choose rests with Mr Messina. He has steered Intesa through Italy’s problems, and until the Generali plan leaked (sending the bank’s shares down 10 per cent), he was liked by investors, particularly because of a promised dividend payout ratio of 70 per cent.
Mr Messina is known to be confident he can maintain the dividend and that any capital surcharge should not top 0.25 per cent. But he is still torn. The former finance chief is famed for his conservative style. That should make him very wary of anything that invites parallels with the most toxic financial deal ever done.