(Bloomberg) -- Banco BPM SpA rebuffed an unsolicited approach by UniCredit SpA, saying its takeover proposal wasn’t agreed in advance, is too low and would likely hurt jobs and competition in Italy.

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The deal terms “do not reflect in any way” Banco BPM’s profitability and its potential for value creation, it said in a statement on Tuesday. At the same time, it acknowledged that UniCredit’s move has triggered a rule that will make it harder for Banco BPM to pursue its own deals.

The response leaves UniCredit Chief Executive Officer Andrea Orcel facing another uphill battle to win over investors, while outlining a potential rationale why the seasoned dealmaker would make an offer with barely a premium. Monday’s bid for Banco BPM had already irritated Italian politicians, who worried that it complicates government efforts to form a major banking group to rival UniCredit and Intesa Sanpaolo SpA, the country’s dominant firms.

UniCredit’s all-stock offer values Banco BPM at around €9.6 billion, based on Monday’s closing prices. Shares of Banco BPM have gained more than 4% this week to give the lender a market value of about €10.5 billion. That suggests investors see potential for the bid to be raised.

“We can see UniCredit throwing in maybe another 10% as a sweetener,” Morningstar analyst Johann Scholtz said by email after the announcement from Banco BPM. Raising it by more than 20% would mean that “the deal will not work for UniCredit.”

Orcel’s bid came after Banco BPM bought a 5% stake in Banca Monte dei Paschi di Siena SpA from the government. That stake would rise if Banco BPM succeeds in acquiring asset manager Anima Holding SpA, which also owns shares in Monte Paschi. Rome is planning to establish a third large banking group around Monte Paschi, with Banco BPM likely to play a key role.

UniCredit’s bid has now triggered a so-called passivity rule for Banco BPM that curtails its flexibility in pursuing its own deals. The rule stipulates that the target company can’t take strategic actions including a change of governance, capital increases or mergers that could impact the proposed deal and hasn’t been agreed before.

This effectively means any revisions to the terms of Banco BPM’s offer for Anima or any next moves on Monte Paschi are harder to make.