On May 11, 2020, the Italian Competition Authority (the “ICA”) adopted a decision to open an in-depth (“Phase II”) investigation into the proposed concentration between Intesa SanPaolo S.p.A. (“ISP”) and UBI Banca – Unione di Banche Italiane S.p.A. (“UBI”; the “Decision”).[1]

The notified concentration

On February 17, 2020, ISP announced a voluntary public exchange offer for the entire share capital of UBI by offering to pay 17 of ISP’s newly-issued shares for every 10 UBI shares tendered. With the offer, ISP aimed to delist UBI and subsequently merge with it.

On the same date, ISP entered into two separate agreements, respectively: (i) with BPER Banca S.p.A. (“BPER”) pursuant to which BPER would purchase from ISP a going concern comprising, among other things, “approximately between 400 and 500” bank branches previously owned by UBI (the “Going Concern”); and (ii) with UnipolSai Assicurazioni S.p.A. (“Unipol”) pursuant to which Unipol would purchase from ISP certain assets relating to the insurance sector previously owned by UBI.

On February 17, 2020, ISP also notified the concentration to the ICA. ISP stressed that the agreement with BPER was binding and that it would be carried out “within a short period of time.” As a result, ISP would not acquire control over the Going Concern on a long-term basis.

The ICA’s decision to open a Phase II investigation

The ICA took the view that it had to assess the concentration as if ISP intended to purchase the whole of UBI. In particular, the Going Concern could not be excluded from the proposed concentration since, at the moment of the notification, “there [were] still significant uncertainties as to the exact definition of the perimeter of the assets being sold,” with specific regard to the exact number and location of the bank branches to be transferred to BPER.

As to the theory of harm outlined in the Decision, the ICA expressed its concerns at a “general level”, noting that in Italy there are two main banking groups: ISP and UniCredit S.p.A. (“UniCredit”). UBI is a smaller group which, according to the ICA, nonetheless has the potential to become in the near future a “pooling hub” for smaller banks, creating a third group that could compete with ISP and UniCredit. For this reason, the ICA held that the proposed concentration could strengthen ISP by “disrupting the symmetry between ISP and Unicredit.

With respect to specific relevant markets, according to the ICA, the proposed concentration could create or strengthen a dominant position in the markets for consumer deposit and loans to both small and medium sized households and enterprises, as well as in the markets for asset management and investment funds, due to their regional dimension and the lack of competitors. On the other hand, in the ICA’s view, the presence of several qualified competitors would sufficiently mitigate the concentration effects of the proposed merger in the market for consumer credit, factoring, leasing and payment services. With regard to the insurance markets, the ICA stated that UBI’s role had to be further investigated.

The Statement of Objections and the hearing of the parties

According to public sources, the ICA issued a Statement of Objections in which it allegedly stated that the proposed concentration “would significantly undermine competition in certain regions, including the industrialised north-east and parts of the south such as Calabria and Abruzzo.[2] On June 18, 2020, the final hearing of the parties before the ICA Board took place and a final decision on the matter is expected shortly.

[1]              ICA Decision No. 28328, Case C12287 – Intesa SanPaolo/UBI Banca – Unione di Banche Italiane.

[2]              S. Sciorilli Borrelli, Italy’s antitrust regulator warns Intesa over UBI takeover (Financial Times, June 9, 2020).