• Italian lender Banco BPM on Tuesday said the unexpected takeover offer by domestic rival UniCredit does not reflect its profitability and could reduce its legal autonomy.
• UniCredit offered to snap up Banco BPM for roughly $10.5 billion on Monday.

Italian lender Banco BPM on Tuesday said the unexpected takeover offer by domestic rival UniCredit does not reflect its profitability.

The 10 billion-euro ($10.52 billion) bid presented by UniCredit on Monday was not previously agreed and was delivered on "unusual" terms, the Banco BPM board of directors said in a CNBC-translated statement.

It also fails to reflect Banco BPM's profitability and potential for further value creation, the board added, flagging that the brisk timeline of a potential merger — expected "in the shortest time possible" — would damage the lender's legal autonomy.

The Banco BPM bid comes two months after Unicredit, Italy's second-largest bank, set its sights on a possible takeover of Germany's Commerzbank. These ambitions have been met with bristling opposition from the German government.

Banco BPM's board said Unicredit's offer exposes its stakeholders to uncertainty surrounding expansion plans in Germany, which could represent a "significant dilution of the present geographical exposure, instead of an attractive concentration of Banco BPM in the most dynamic regions of the country and of the Euro zone."

UniCredit CEO Andrea Orcel on Monday said a Banco BPM transaction would take precedence over any potential venture with Commerzbank, according to Reuters.

CNBC has reached out to UniCredit for comment.

UniCredit's Milan-listed shares were flat at 12:37 p.m. London time on Tuesday, with the stock of Banco BPM down 0.20%.

'Historical target'

On Monday, the bank offered to pay 6.657 euros for each share of Banco BPM — marking only a slight premium on Friday's close price of 6.644 euros — as part of an all-stock deal. In a statement accompanying the bid, Orcel described Banco BPM as a "historical target" — fanning the flames of media reports that UniCredit had previously courted a union with its domestic peer back in 2022.

"Europe needs stronger, bigger banks to help it develop its economy and help it compete against the other major economic blocs. Thanks to the work that has been done over the past three years, UniCredit is now well positioned to also answer that challenge," Orcel said.

His consolidation overtures have yet to bear fruit as UniCredit awaits the European Central Bank's approval to bolster its current 21% holding in Commerzbank to 29.9% —  and has enjoyed a so-far tepid reception of its domestic plan from the Italian government.

"The safest way to lose a war is engaging on two fronts, although maybe the rule won't be true this time", Economy Minister Giancarlo Giorgetti said Monday of UniCredit's Banco BPM and Commerzbank ambitions, according to Italian newswire ANSA.

The stage was set for Italian M&A earlier this month after Banco BPM acquired a 5% holding in Monte dei Paschi —  the world's oldest lender and itself a former takeover target of UniCredit until talks collapsed in 2021 — as the government sought to trim its stake in the bailed-out bank. At the time, Banco BPM said it did not intend to submit a request to potentially exceed the threshold to acquire more than 10% in Monte dei Paschi.