Banco Popolare to Merge With BPM, Creating Italy's No. 3 Lender

Banco Popolare SC agreed to merge with Banca Popolare di Milano Scarl in a deal that will create Italy’s third-largest lender.

Banco Popolare investors will own 54 percent of the combined lender, the banks said in a joint statement on Wednesday. As part of the plan, Banco Popolare will raise 1 billion euros ($1.1 billion) through a capital raise before the merger underwritten by banks.

Banco Popolare and Banca Popolare di Milano reached an agreement after adjusting the terms to satisfy the European Central Bank, according to people with knowledge of the matter. The banks have been racing to meet the ECB’s requests that they form a company with a strong capital position and transparent governance. Shares in the two banks were suspended from trading on Wednesday pending an announcement.

It’s important that the merger is successful because it may be the first of many, Daniele Nouy, chairman of the ECB’s supervisory arm said in a report to the European Parliament in Brussels on Tuesday. While the ECB welcomes mergers in Italy, they have to be successful and make sense from a regulatory standpoint, she said.

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