INTESA SANPAOLO SpA launched one of the biggest European banking deals since the financial crisis with an unsolicited 4.9 billion-euro ($5.3-billion) bid for smaller rival Unione di Banche Italiane SpA (UBI).

Under the offer, UBI investors will get 17 new shares of Intesa for every 10 UBI shares they hold. That valued UBI at about 4.25 euros a share, Intesa said in a slide presentation.

Shares in UBI rose as much as 29% to €4.41 euros — above the bid price — in Milan, while Intesa added 3.6% on Tuesday, as most Italian banks jumped on news of the bid.

The all-share offer, announced late Monday, was made without the knowledge of UBI Banca’s board, according to a person with knowledge of the matter. The directors will meet as soon as Tuesday to discuss the bid. A UBI representative declined to comment.

Large-scale consolidation in European banking has stalled since the financial crisis despite the widely held view that greater scale would make struggling lenders more competitive. Analysts have been predicting mergers in Italy and elsewhere due to the pressure on bank profits from low interest rates, regulatory costs and the need to invest in technology.

Intesa said it expects to finalize the UBI purchase this year and sees the deal boosting its earnings per share by 6% from 2019 levels.

“The bid is very appealing for both ISP and UBI shareholders, as it would create a massive player in Italy, especially in the north, with very high efficiency levels and competitive product companies,” said Stefano Girola, a portfolio manager at Alicanto Capital SGR in Milan. “I think the announced synergies are just a starting point and more will come.”

The move appears to have taken UBI completely by surprise. The Bergamo-based bank released its three-year strategic plan only Monday. CEO Victor Massiah said the bank is pursuing a standalone strategy but may consider merger opportunities going forward. The strategic plan involves the elimination of 2,030 positions and the closure of 175 branches through 2022.

Intesa seems to have prepared the move well in advance; part of the deal involves it selling 400 to 500 branches to BPER Banca that the two banks operate jointly. BPER will call an extraordinary meeting to approve a 1 billion-euro rights issue to fund the transaction. The sale is already fully underwritten by Mediobanca SpA.

Intesa’s move also includes a binding agreement with insurer UnipolSai Assicurazioni, that provides for the disposal of insurance activities. The agreements were made to “preemptively address anti-trust issues,” the bank said.

The combined bank will hold savings of more than €1.1 trillion and revenue of €21 billion. UBI’s existing management “may have significant prospects in the group that will be born from this operation.” Intesa Chief Executive Officer Carlo Messina said in a statement on Tuesday. — Bloomberg

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