Italian lender Banco BPM on Tuesday said the unexpected takeover offer by domestic rival UniCredit does not reflect its profitability and could reduce its legal autonomy. UniCredit offered to snap up Banco BPM for roughly $10.

UniCredit on Monday launched a €10.1bn takeover bid for BPM, Italy’s third-largest bank, surprising the market and the country’s political establishment.

UniCredit SpA has hired Deloitte LLP to advise Italy’s second-biggest bank on its takeover bid for Banco BPM SpA, people familiar with the matter said.

The Italian Treasury has denied a report that it is drafting an emergency decree to counter UniCredit’s (OTCPK:UNCFF)(OTCPK:UNCRY) 10B euro ($10.6B) bid for Banco BPM, Reuters reported late Friday. UniCredit made the offer for the smaller rival on Monday,

UniCredit's bid for BPM also throws a spanner in the works for Italy's government, which had advanced plans for a merger of BPM with rival Monte dei Paschi di Siena which it saw as strengthening its banking sector without harming competition.

UniCredit SpA informed top officials in the Italian government and Banco BPM SpA Chairman about its intention to make a takeover bid for its smaller rival before announcing the move on Monday, people with knowledge of the matter said.

The bid from the larger Italian lender "does not reflect in any way the profitability and further potential to create value for Banco BPM shareholders", it said in a statement.

Italy's Banco BPM on Tuesday rebuffed a 10 billion euro ($10.5 billion) unsolicited takeover offer by rival UniCredit, saying it undervalued the bank, tied its hands in strategic deals and created new risks for shareholders.