Banco Popolare Offers $1.1 Billion Stock at 29% Discount

  • Banco sells stock at 2.14 euros each, offers 9 shares every 7
  • Rights rights issue part of merger deal with BPM Bank

Banco Popolare SC will sell stock at about third less than Thursday’s closing price in a planned 1 billion-euro ($1.12 billion) rights offering ahead of its merger with Banca Popolare di Milano Scarl.

The stock will be priced at 2.14 euros and investors can buy nine shares for every seven they hold, the Verona-based company said in a filing after markets closed Thursday. That would be worth 29.3 percent less than its theoretical value excluding the rights.

A discount of less than 30 percent “is a positive signal,” showing that the underwriting group is confident the rights will be taken up, Matteo Ghilotti, an analyst at Equita SIM SpA who has a buy recommendation on the stock, wrote in a report Friday.

The share sale is a key component of the lender’s plan to merge with Banca Popolare di Milano, to create Italy’s third-largest lender with 171 billion euros of the assets. Banco Popolare needs to tap investors to comply with European Central Bank demands for bigger capital buffers.

European lenders are under pressure from regulators to strengthen their finances and improve credit quality ahead amid a new round of stress tests involving the region’s biggest lenders. Italy’s Veneto Banca SpA is seeking to raise 1 billion euros after Banca Popolare di Vicenza SpA’s IPO attracted little investor interest and a state-orchestrated rescue fund had to step in to buy the shares.

Banco Popolare fell as much as 5.9 percent in Milan trading and was down 3.4 percent at 4.03 euros as of 2:50 p.m. The lender has dropped 67 percent this year, compared with a 17 percent decline in the 47-member STOXX 600 Banks Index.

Investors will be able to exercise their rights from June 6 through June 22, and those that aren’t exercised will be offered on the market within a month after the subscription period ends. Italy’s market regulator has approved the share sale document, the lender said in a separate statement on Friday. Bank of America Corp. and Mediobanca SpA are managing the sale.

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