Unipol spent 235.6 million euros ($248 million) to buy 10.2% of Lombardy-based BPSO at a 4% premium versus Wednesday's closing price, or a 10.5% premium over the last month's average.

Trading at 0.6 times its estimated tangible equity in 2024-2025, BPSO is some 15% more expensive than its closer peers, said Equita, one of the advisors to the purchase.

Unipol, which is already the biggest shareholder in Italy's fourth-largest bank BPER, had first invested in BPSO in 2021, tightening in this way their insurance partnership. It is also BPER's insurance partner.

Long seen as an attractive target, BPSO was the last large cooperative bank in Italy to ditch that status, which shielded it from potential takeovers, complying at last with a government reform after losing a court battle to stop it.

Unipol's stakebuilding has long stoked speculation of an eventual tie-up between the BPSO and BPER.

To build a wider network for his insurance products, Unipol Chief Carlo Cimbri in 2020 bought some 600 branches as part of bank Intesa Sanpaolo's takeover of rival UBI.

The move aided that merger and propelled BPER onto a growth path by boosting its assets by 40%, after years-long attempts to clinch a merger with rival Banco BPM led nowhere.

While still busy integrating the branches, BPER last year bought troubled peer Carige with Unipol's backing.

Unipol owns nearly 20% of BPER and has supported its growth by taking part in a 800 million euro capital raise that helped it buy the Intesa-UBI branches.

Like Banco BPM, BPER is seen as a potential candidate to merge with Monte dei Paschi which must be re-privatised by the state.

However, a dearth of interested buyers in the near term has pushed Rome to evaluate instead possible share placements to work towards re-privatisation commitments, pending a more permanent solution.

Mediobanca and Equita handled the share purchase on behalf of Unipol. ($1 = 0.9509 euros)

(Reporting by Gianluca Semeraro; Writing by Valentina Za; Editing by Ros Russell)