by Neil Unmack

LONDON, June 8 (Reuters Breakingviews) - Why get involved in one thorny banking deal when you can have two? Intesa Sanpaolo has launched a 30.6 billion euro bid for Banca Mps, which is itself still digesting last year's hostile acquisition of Mediobanca. Mps chief executive Luigi Lovaglio must also contend with the complication of competitor Banco Bpm - valued at 20 billion euros - which over the weekend proposed entering into merger talks. For now, his best course of action amid this turmoil is to do nothing and argue that Intesa's offer is too low.

Today's bid was yet another twist in the long-running Italian saga. Last year, Mps secured control of Mediobanca, bringing a substantial stake in Generali to the Lovaglio-led lender. Many in Milan assumed that Lovaglio's next move, after securing a historic shareholder vote, would be a merger with Banco Bpm, thereby creating a 'third pillar' in the Italian banking sector alongside Intesa and UniCredit.

Intesa CEO Carlo Messina clearly has other plans, judging by his predominantly stock-based offer, which would effectively break up Mps and see about half of the branches pass to another bank via Unipol to avoid antitrust risks. Intesa believes it can achieve approximately 1.5 billion euros in cost savings, in addition to significant revenue synergies.

Messina has gone on the offensive while Mps is distracted and, arguably, cheap. Lovaglio has not even completed the delisting of Mediobanca and has yet to reap the rewards of his bold move. On Friday, Mps's share price stood at just 1.2 times its forecast tangible book value, well below its Italian peers. Lovaglio and his shareholders may have hoped to close the gap on their own, which could make them less inclined to accept Messina's move.

Intesa could also face renewed scrutiny from competition authorities despite the disposals, as its share of Italian lending would jump from 18% to 24%. Lovaglio could also argue that hostile takeovers, such as the one Messina is attempting, have a chequered history in the European banking sector. Mps itself learned this when it purchased Antonveneta in 2007.

Lovaglio has several options. He could enter into talks with Bpm, for example. A straight merger of equals with no premium, using Friday's prices, would grant Mps shareholders about 58% of the combined bank. However, Lovaglio will keep in mind that his negotiating position will be stronger against Bpm if he can first increase his own valuation.

One unknown is UniCredit CEO Andrea Orcel, who recently made an unsuccessful attempt to buy Bpm. Another question concerns the views of Mps's majority shareholders, such as Delfin, the Del Vecchio family vehicle, and Francesco Gaetano Caltagirone. Together, they hold nearly 30% of the capital.

In any case, Lovaglio can argue that Intesa should offer more. Intesa expects to derive an additional 4.5 billion euros in net profit from the deal by 2029. Dividing this figure by the total outlay, net of costs and cash from the branch sales, the return on invested capital stands at around 15% according to Breakingviews calculations: an attractive gain considering Intesa's cost of equity is likely around 10%. The gap suggests room for a higher bid. Messina's move looks astute, but it is certainly not checkmate.

(Translated by Jasmine Mazzarello, editing by Gianluca Semeraro)