* UniCredit CEO sees no risk of hostile takeover
* UniCredit CEO contacted about possible merger plan,
* Italian press say UniCredit vulnerable, foundations
* Merger seen bolstering UniCredit defence, but would face
By Paola Arosio and Silvia Aloisi
MILAN, Nov 5 Italy's biggest bank by assets
denied on Monday there were any plans for a tie-up with rival
Intesa Sanpaolo after sources close to the matter said
UniCredit chief executive Federico Ghizzoni had been
sounded out on the issue.
A source close to a UniCredit shareholder told Reuters the
chairman of Intesa's supervisory board, Giovanni Bazoli, sent a
friendly banker to discuss a tie-up with Ghizzoni but that he
had rejected the idea.
A second source said a project for a possible merger between
Italy's two biggest banks "exists" but that there was no
guarantee it would materialise.
"Feelers have been put out over the past few days to see
what the reaction would be," the second source said.
That followed a report in Italian newspaper Corriere della
Sera last week that has spurred a media frenzy over the issue
and a series of denials by officials from both banks.
"No, this is folly," Ghizzoni told reporters on Monday when
asked whether UniCredit could fall prey to a hostile bid either
now or in the future.
"We are going ahead on our own," he added, in response to a
question about a possible Intesa merger.
Italy's banks have taken a hammering from a debt crisis that
has slashed the value of the swathes of Italian and other euro
zone government bonds they hold while also forcing hefty cuts in
spending that have helped drive Italy itself into recession.
Both Intesa and Unicredit have unveiled sweeping job cuts
and seen their combined market value dive to just over 40
billion euros, well below that of European rivals.
According to the first source, Bazoli's overture was backed
by the powerful head of ACRI, an association bringing together
the foundations that are core shareholders in Italy's leading
Those foundations have seen their stakes in UniCredit
diluted by a 7.5 billion euros capital increase earlier this
year at the expense of foreign investors including Abu Dhabi
investment vehicle Aabar and Pamplona Capital Management.
The source said the foundations feared that UniCredit could
be snapped up by a foreign bidder the moment it becomes clear
the euro zone has got a grip on its debt crisis and Italy's
problems are not going to spiral out of control.
"What they wanted to do is save UniCredit, which is
potentially vulnerable to foreign interests," the source said,
adding that a merger with Intesa was regarded as a way to
bolster UniCredit's defences.
"But it's impossible, it doesn't fly. There'd be antitrust
problems and it would not be easy to find a buyer for
UniCredit's Italian network," the source said.
Intesa management board chairman Andrea Beltratti declined
to comment on the merger speculation on Monday. At the weekend,
Intesa's CEO Enrico Cucchiani poured cold water on the issue,
telling Il Sole 24 ore daily it was "much ado about nothing."
UniCredit is Italy's most internationally-oriented bank,
with operations in 22 countries, and a strong position in
Germany, Austrian and eastern Europe. Intesa is Italy's biggest
retail lender and makes 80 percent of its revenues in its home
country - compared to less than 50 percent for UniCredit.
But UniCredit's shareholder structure is more fragmented
than Intesa's, making it potentially more vulnerable.
The main foundation shareholders in UniCredit have a
combined stake of just over 10 percent, compared with around 16
percent for the bank's three largest investors - Aabar, Pamplona
and the Libyan government.
"The foundations no longer have a big enough stake to defend
the bank, but I can't see which other foreign lender,
particularly in Europe, would want to buy UniCredit, given they
all have their own problems and are in the process of
deleveraging," said Fidentiis analyst Fabrizio Bernardi.
"A merger with Intesa seems science fiction. With their
market share in Italy, one of the two would have to get rid of
the domestic retail network, at a loss," said Bernardi, who like
other analysts was deeply sceptical about the merger
Intesa has a 16 percent market share in Italy and is already
merging or shutting 1,000 branches, or a fifth of its domestic
network. UniCredit, with a 13 percent market share in Italy, has
closed 800 out branches as part of its own restructuring plan.
Both banks have also announced 11,000 job cuts in total as
they seek to cut costs and restore profitability.