Italian bank Intesa's improved €35 billion bid for MPS wins backing of biggest investor

By Valentina Za

MILAN, Oct 5 (Reuters) - Italy's biggest bank Intesa Sanpaolo ISP.MI has claimed a major victory in its pursuit of Monte dei Paschi di Siena (MPS) BMPS.MI by securing the support of its target's largest shareholder for a sweetened takeover offer.

Intesa's €35 billion ($39 billion) bid for MPS is the culmination of hectic consolidation in Italian banking over the past two years. After initially citing antitrust limits for its refusal to join in, Intesa entered the fray in June, just as rival UniCredit CRDI.MI closed in on Germany's Commerzbank CBKG.DE.

MPS had been leading the way until then, having acquired control of bigger rival Mediobanca and become the main investor in Generali GASI.MI, Italy's largest insurer and a prized financial asset.

To fight Intesa's takeover bid, MPS Chief Executive Luigi Lovaglio drew up a defence plan and called on shareholders to back his strategy in a vote on October 29.

MPS has been working on taking Mediobanca private and merging with it, a scheme which will also be put to shareholders on October 29.

Lovaglio's plans need the backing of two thirds of the bank's shareholders.

Intesa, however, announced late on Sunday that Delfin, the biggest MPS investor with a 17.6% stake, had committed to tendering its stake under Intesa's cash-and-shares bid and to vote against the defence scheme.

Support from Delfin, long an ally of MPS chief Lovaglio, was key to the MPS bid defence. However, Delfin now appears to favour the simpler Intesa deal while its own shareholders, the heirs of late Ray-Ban billionaire Leonardo Del Vecchio, are embroiled in legal quarrels over his inheritance.

MEDIOBANCA SHARES DIVE

Intesa has said it would retain only half of the MPS branch network to address competition concerns, but it would keep the Mediobanca and Generali holdings.

Shares in Mediobanca fell as much as 7% on Monday after Intesa urged MPS shareholders to vote against that merger, which would entail a buyout of minorities.

Shares in both MPS and Intesa edged higher.

Intesa said late on Saturday that it would give MPS shareholders a further €800 million in cash under its bid if they reject Lovaglio's defence plan.

Under Italian takeover rules, investors must authorise any defence strategy that could block a bid.

Lovaglio has been trying to cast the vote simply as a way to keep pressure on Intesa. However, Intesa said it would take its offer off the table if MPS shareholders approve the defence strategy.

The sweetener raises the bid's cash component of €3 billion by 25% but represents an overall improvement of 2.3% based on the closing price for MPS shares on Friday.

($1 = 0.8939 euros)