Banco BPM takeover battle deepens as Brussels slaps Italy with warning
The Commission warned Italy on Monday that obligations placed on the merger 'may constitute a breach of Article 21 of the EU Merger Regulation (EMUR) and of other provisions of EU law', according to an official statement.
Rome decided to use its so-called 'Golden Power' rule to set conditions for the deal, a power created to protect national security interests. It gives the government the right to block or set conditions on foreign and domestic corporate takeovers in strategic sectors.
Banco BPM is Italy's third largest bank, formed in 2017 through the merger of Banco Populare and Banca Populare di Milano. UniCredit, the country's second largest bank, is currently trying to acquire it, although progress may be stalled further as the European Commission has now issued a warning to Italy over potential unlawful demands.
The European Commission approved UniCredit's acquisition 'subject to conditions' on 19 June. However, earlier, the Italian Prime Minister's office issued a decree on 18 April, imposing obligations on UniCredit in the case of a successful takeover.
What is the problem with the takeover?
According to their website the European Commission defines Article 21 as: 'Member States may take appropriate measures to protect legitimate interests, provided these are compatible with general principles and other provisions of EU law, and are appropriate, proportionate and non-discriminatory. This is subject to Commission scrutiny, notably to safeguard its competence under the EUMR and avoid Single Market fragmentation.'
Following the decree from the Prime Minister's office, the Commission requested more information from Italy on 26 May. Italy responded on 11 June.
After analysis, the Commission found that the 'the conditions' justification currently lacks sufficient reasoning', and that the decree should have been reviewed by them before implementation by Italy. The Commission also added that, as well as Article 21, Italy's approach may breach other EU laws on the free movement of capital and on prudential oversight by the European Central Bank.
An Italian court also partially annulled the decree on 12 July. The Commission is awaiting further response from Italy before deciding its next steps.
The offer period of the deal to Banco BPM from UniCredit is set to expire on 23 July.
UniCredit offered to buy Banco BPM for €10 billion in late November last year. In a statement, the smaller lender said the bid from UniCredit did "not reflect in any way the profitability and further potential to create value for Banco BPM shareholders", rejecting the offer.
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