November 8, 2019

Breakingviews: UniCredit picks right time to cut Mediobanca cord

by Breakingviews.

UniCredit is parting ways with Mediobanca, which it helped found in 1946. The 8.4% stake sale won’t net big gains for boss Jean Pierre Mustier. The chief benefit may be to avoid Italy’s top bank getting dragged into a brewing governance row at its smaller rival.

UniCredit’s French boss has chosen the right time to pull out of Mediobanca, in which UniCredit was the largest investor. Shares in the Milan-based bank have rallied some 40% this year and hit their highest in over 10 years on Monday, helping put the stake in the money. The sale, conducted through an accelerated bookbuild, will result in proceeds of about 785 million euros, but won’t move the needle for the 27 billion euro UniCredit’s capital ratios.

There are other considerations. Despite UniCredit’s historic ties with Mediobanca, keeping a large stake in a direct competitor was probably not sustainable. Although Mustier managed the investment at arm’s length, the two banks jostle for clients. Cutting the cord removes any suspicion of a potential conflict of interest. The move is also in line with UniCredit’s quest for a leaner, cleaner structure. That should stand Mustier in good stead if he ever wants to merge UniCredit with a foreign rival. He also recently sold UniCredit’s stake in Italian online broker FinecoBank.

The sale brings another advantage. Under Chief Executive Alberto Nagel, Mediobanca has left behind years of corporate power broking and diversified into wealth management and consumer banking. This approach is now being challenged by Leonardo Del Vecchio, Italy’s richest man and the top investor in 60 billion euro eyewear behemoth EssilorLuxottica. Del Vecchio wants to unravel Nagel’s strategy, pushing Mediobanca back into merchant banking and may harbour M&A ambitions for Assicurazioni Generali, in which Mediobanca is the largest shareholder. Del Vecchio has now, thanks to UniCredit’s sale, increased his stake to nearly 10%. The conflict is likely to heat up now that UniCredit has left the picture, and Del Vecchio is Mediobanca’s largest shareholder.

The looming battle at Mediobanca would have put Mustier in a tricky position. It would have attracted negative publicity, forced him to choose sides, and risked distracting him from the more important matter of restructuring his own bank. Extricating UniCredit now from a likely explosive situation seems wise.


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