ISP Intesa Sanpaolo Spa

By Carlo Martuscelli

Shares of Unione di Banche Italiane S.p.A., or UBI Banca, surged in trading on Tuesday morning following a surprise offer made by larger peer Intesa Sanpaolo S.p.A. on Monday night to buy the Italian lender.

The proposed all-share deal--which values UBI Banca at 5.02 billion euros ($5.44 billion)--would mean shareholders receive 17 Intesa Sanpaolo shares for every 10 UBI Banca shares held.

Intesa plans to delist UBI Banca, which is the fourth-largest banking group in Italy by number of branches, with a market share of about 7%.

Shares of UBI Banca at 0844 GMT were up 26% to EUR4.40, while Intesa Sanpaolo shares traded 1.6% higher at EUR2.58.

Giovanni Razzoli, an analyst at Italian investment bank Equita, called the offer totally unexpected.

"The strategic rationale of the deal lies in the consolidation of the domestic market--where Intesa is expected to increase its market share to 20%," he said.

Financial analysts have previously said that Italy's banking sector is ripe for consolidation.

Low interest rates have weighed on the bottom lines of lenders in the fragmented sector. Consolidation could help shore up profitability,. which efforts to clean up balance sheets through the reduction of nonperforming loans have simplified the merger process.

Meanwhile, the European Central Bank has signaled in private that it is open to potential tie-ups, the Wall Street Journal reported in January.

Write to Carlo Martuscelli at carlo.martuscelli@wsj.com; @carlomartu

(END) Dow Jones Newswires

February 18, 2020 04:14 ET (09:14 GMT)

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