By Valentina Za and Andrea Mandala
MILAN (Reuters) - UBI Banca (MI:UBI) on Thursday rejected a sweetened takeover bid by rival Intesa Sanpaolo (MI:ISP), saying it still failed to reflect the real value of Italy's fifth-largest bank and adequately reward its shareholders.
Intesa and UBI have engaged in a bitter tit-for-tat over what would be one of Europe's biggest banking mergers since the global financial crisis.
In an effort to win over UBI's core shareholders, Intesa last week said it would offer 0.57 euro in cash in addition to 1.7 new Intesa shares for each UBI share.
Intesa, which had previously ruled out improving the bid, said it would spend up to 652 million euros to offer a 40% premium on UBI's closing price on the day the offer was unveiled, up from the initial 24%.
Despite UBI's rejection of the offer, analysts expect the generous premium to convince shareholders. The sweetener last week prompted investors holding 20% of UBI to say they would tender their shares.
UBI however said the cash component only partially offset a valuation shortfall which the bank and its advisers put at 1.1 billion euros.
The enhanced implicit exchange ratio of 2.0 Intesa shares for each UBI share is still below an average ratio which UBI said should be 2.4 times.
Italy's second-biggest bank sprung its offer on UBI in mid-February, a few days before COVID-19 contagion hit Italy, in a push to drive profit through cost cuts by snatching up the healthiest among second-tier peers.
UBI has fought the bid, saying it aims to take out a competitor that could play an active role in long-awaited banking consolidation in Italy.
Take-up stands at 26.4% of UBI's capital, but it is expected to easily reach 60% before the bid ends on July 28, two sources close to the offer told Reuters.
The minimum take-up for the offer's validity is of 50% plus one share.
Acceptance of 66.7% would guarantee Intesa control of extraordinary shareholder resolutions, easing the sale of 532 bank branches, mostly UBI's, which Intesa has committed to for antitrust reasons.
To entice retail customers and small business owners which make up roughly half of UBI's investor base, Intesa has invested in full-page newspaper ads and TV commercials to market the advantages of its offer.
UBI, in turn, has advertised its board's rejection of the bid with full-page ads saying "Trust cannot be bought."
Consumer association Codacons said on Thursday it has asked market regulator Consob and prosecutors in Milan and Bergamo to make sure that UBI clients received accurate information on Intesa's bid from their local branch.