Leading governance adviser Institutional Shareholder Service (ISS) said on Friday it had recommended that shareholders in Italian lender Monte dei Paschi di Siena (BMPS.MI) vote against a proposed share issue to fund its bid for Mediobanca (MDBI.MI).
ISS said in its report that Monte dei Paschi was proposing "a transformational, almost unparalleled, deal."
The tie-up is unusual because the two banks have little overlap, which reduces the scope for the staff cuts that normally drive savings in bank mergers. It is centred instead around a push to diversify sources of revenues.
Monte dei Paschi was bailed out by the state in 2017 and has since returned to profits and dividends under CEO Luigi Lovaglio. The state has cut its stake to 11.7% from 68%.
"The deal is unique because it is hostile, seeking to merge different entities, and because there is a size difference (the bidder's market cap being 30 percent smaller than the target's on the unaffected date)," ISS said.
Monte dei Paschi has said that Mediobanca's market value should be seen net of the contribution deriving from its position as the main shareholder in Italy's top insurer Generali (GASI.MI).
Generali profits account for around 40% of Mediobanca's annual income.
