With its plans for Germany's Commerzbank seemingly stalled, UniCredit, Italy's second-largest lender, launched Monday a bid to buy its rival BPM for 10.1 billion euros ($10.6 billion).
But Prime Minister Giorgia Meloni's government was quick to pour cold water on the deal, saying it had not agreed and raising the possibility of using the government's so-called "golden power", which allows it to block takeovers in strategic sectors of the economy.
Before Monday's bid, speculation had been rife about a tie-up between Banco BPM and Monte dei Paschi di Siena (MPS), which could challenge UniCredit and Italy's number one bank, Intesa Sanpaolo.
UniCredit Chief Executive Andrea Orcel said Monday that after his bank's aborted attempts to buy MPS came to an end three years ago, it had "no ambitions" for it now.
By contrast, UniCredit's bid for Banco BPM -- Italy's third-biggest bank -- would create "an even stronger number 2 bank in an attractive market generating significant long-term value for all stakeholders and for Italy", the lender said in a statement.
If it secures regulatory approval, UniCredit hopes to be able to complete the deal by June 2025.
Yet Italian Economy Minister Giancarlo Giorgetti said the bid had been "communicated but not agreed with the government".
The government would make an assessment, he said, noting that "the golden power exists".
UniCredit valued BPM shares at around 6.657 euros each, about 0.5 percent above Friday's closing price -- not enough, according to Equita analysts.
BPM shares rose more than five percent on the Milan Stock Exchange on Monday, to 6.988 euros at around 1600 GMT -- a sign that investors expect UniCredit will have to increase its bid to secure a deal.
Conversely, UniCredit stock fell more than five percent to 36.14 euros.
"Europe needs stronger, bigger banks to help it develop its economy and help it compete against the other major economic blocs," Orcel said in a statement.
UniCredit surprised markets and Berlin in September when it announced it had built a significant stake in Commerzbank, Germany's second-largest lender, fuelling speculation of a takeover bid.
Germany's new finance minister, Joerg Kukies, scolded UniCredit last week for acting "aggressively" and using "unfriendly methods".
He said that "hostile takeovers are not what we need for stable banks in Europe and in Germany".
Kukies was appointed after Chancellor Olaf Scholz fired his predecessor, an act that brought Germany's government coalition crashing down, precipitating general elections set for February 23.
Orcel said earlier this month that UniCredit would need a year to decide on the Commerzbank deal, and on Monday insisted: "We need to be patient and give everyone the time to deliberate."
"We would only proceed if certain conditions are achieved, which requires a change of position of certain counterparts," he said in a call with analysts.
