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Italy’s fourth-largest lender, Banco Popolare, priced its planned 1 billion euro ($ 1 billion) share issue on Thursday at a 49 percent discount to its current stock price, in contrast to the brutal penny-stock valuations forced on two weaker peers.
Even at a steep discount, a well-supported Banco Popolare issue would be a relief for the Italian banking industry, the euro zone’s fourth biggest, which is saddled with 360 billion euros in bad debts and dogged by recent bank failures and a failed listing.
Banco Popolare is raising money to help secure the future of its 171 billion euro marriage with peer Banca Popolare di Milano to create Italy’s third-largest bank.
The cooperative lender said it would sell 465.6 million new shares at 2.14 euros each, roughly half the closing price of 4.17 euros or a third less than its theoretical price taking into account share dilution and the amount raised.
It is offering nine new shares for every seven held.
Its shares have slumped in the run-up to the issue, down nearly 70 percent this year, but its call for cash has roused more interest than seen in the flopped capital raising by two smaller banks over the past five weeks.
The issue is fully backed by underwriters Mediobanca and Bank of America Merrill Lynch, in contrast to the offerings of Banca Popolare di Vicenza and Veneto Banca which have both required the support of a new banking bail-out fund.
The state-backed Atlante fund bought almost all of Vicenza’s 1.5 billion euro offer and a listing was aborted. The fund is also ready to be buyer of last resort for Veneto Banca’s 1 billion euro IPO. Both banks have penny-stock valuations.
Banco Popolare, whose Tier 1 capital ratio stood at 12.5 percent at the end of the first quarter, last tapped shareholders for cash in 2014 when it raised 1.5 billion euros.
Shareholders can trade their rights from Monday to June 22, the day before Britain votes on its European Union membership, an event that could make big waves across global markets.
(Reporting by Valentina Za; Writing by Giulia Segreti; Editing by Mark Bendeich and Alexandra Hudson)