ROME: Banco Popolare’s 1 billion euro ($1.1 billion) cash call got off to a solid start on Monday with a rise in the price of the “rights” to subscribe to the offer needed for its planned merger with rival Banca Popolare di Milano.
Italy’s fourth-biggest bank is raising cash to boost provisions against loan losses ahead of a government-backed deal to forge the country’s third-biggest lender which will have assets totaling 171 billion euros. Shares in Popolare gained 1.6 percent after reversing initial losses, while the rights BAPO_r.MI to subscribe to the offer rose 4 percent, also after an initial fall. The offer is scheduled to run until June 22.
A Milan-based trader attributed the opening slide in the price of the rights to selling by small investors who have decided not to “follow their money” by exercising their rights. “There are no particular concerns on the market that the (underwriting) consortium could end up with a large chunk of the issue,” the trader said.
Mediobanca and Bank of America Merrill Lynch are committed to taking on any unsold shares. A successful capital raising would be welcome news for Italy’s battered banking system after last month’s flopped initial share offering at Banca Popolare di Vicenza.
Italy’s eighth biggest bank was denied permission to list and is now 99 percent owned by bank bailout fund Atlante which took on 1.5 billion euros worth of unsold shares. The hastily-established rescue fund is backstopping also a 1 billion euro initial public offering by fellow regional bank Veneto Banca due to launch on Wednesday. Popolare Vicenza and Veneto Banca must plug capital gaps to avoid being wound down. The capital strengthening at Banco Popolare was among the conditions set by European Central Bank supervisors to give a preliminary approval to the deal.
Banco Popolare is selling new shares at 2.14 euros apiece offering nine new ordinary shares for every seven already held. Shares in the bank have lost nearly 70 percent so far this year. Brokers last week said a decision to offer new shares at a 29 percent discount to the theoretical ex-rights price meant the banks managing the sale were confident about investors’ take-up.
