ITALY: Italian UniCredit buys Capitalia and creates the second biggest European bank and the sixth largest worldwide in terms of market capitalisation

Italian UniCredit buys Capitalia and creates the second biggest European bank and the sixth largest worldwide in terms of market capitalisation. Italy's UniCredit agreed to buy smaller rival Capitalia on Sunday (May 20) for more than $29 billion in shares to create Europe's second biggest bank with branches stretching from Sicily to Eastern Europe. The deal cements UniCredit position as Italy's largest bank by market value and ends years of speculation on who would carry off Rome-based Capitalia -- a much sought-after target in a quickly consolidating the sector. Capitalia chairman Cesare Geronzi will become vice chairman of UniCredit, while UniCredit's Chief Executive Alessandro Profumo and Chairman Dieter Rampl will retain their titles. "We believe this operation gives strength to Unicredit Group in Italy and gives a great opportunity abroad for Capitalia in addition to the increase of its activity in Italy," Profumo said at a news conference in Rome. UniCredit will pay 1.12 of its shares for each Capitaliashare, valuing Capitalia at 8.41 euros a share or 21.83 billion euros ($29.47 billion), according to UniCredit's last share price before their trade was halted on Friday (May 18). "This merger is essentially a domestic one, with limited impact on our international operations and our core markets outside Italy. So we anticipate no disturbance but a small positive business impact in Germany, in Austria and in the other 17 CEE countries in which we operate," Rampl said. "This is the proof that everybody wanted -- this operation, and the fact that everybody wanted it means a lot for us, the persuasion that this would give further strength to a group that is already very important," Geronzi said. Geronzi is appealing a conviction for fraud in a real estate and hotel group case. Prosecutors have asked to indict him in a case linked to the Parmalat bankruptcy. He has denied any wrongdoing. The deal would be accretive for UniCredit's shareholders as from 2009 and bring pre-tax savings of 1.2 billion euros from 2010. There would be a one-off pre-tax restructuring charge of 1.1 billion euros. UniCredit's earnings per share would grow by 17 percent a year on average through 2010. The dividend would also grow progressively. UniCredit will have about 9,200 bank branches globally, roughly 960 billion euros in total assets and 40 million customers from Italy to Russia. Outside its homebase, it will rank second biggest in Germany and number one in eastern Europe.

ITN Source | May 21, 2007

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