Negotiations with UniCredit: sale of the Monte dei Paschi crisis bank failed

Status: 10/24/2021 9:38 p.m.

The sale of the crisis bank Monte dei Paschi to UniCredit failed. The main disagreement was about further capital injections, insiders said. Now majority owner Italy has to find another way to save the money house.

The possible sale of the nationalized Italian crisis bank Monte dei Paschi di Siena (MPS) to rival UniCredit has failed. The negotiations were broken off and would no longer continue, said UniCredit and the Ministry of Economic Affairs.

The Bloomberg news agency had previously reported, citing people familiar with the situation, that the talks had failed because of disagreements about another capital injection for Monte dei Paschi and the business that is to be transferred to UniCredit.

Differences in evaluation

A source told Reuters news agency that the two sides disagreed on financial issues. UniCredit has demanded that the state should put a further 6.3 billion euros in Monte die Paschi in view of the necessary corrections in the books of the MPS. The Ministry of Finance did not consider these adjustments to be justified to a large extent.

In addition, Unicredit valued the parts of the MPS that it wanted to buy at only 1.3 billion euros. The Ministry of Finance assumed, however, from 3.6 to 4.8 billion euros. Thus, UniCredit’s demands would have thwarted the government’s goal of not selling the MPS below value. UniCredit did not want to comment on the information.

Saved with 5.4 billion euros in 2017

The end makes it difficult for Prime Minister Mario Draghi to sell the Monte dei Paschi again by mid-2022, as agreed with the EU. Italy saved the world’s oldest bank from collapse in 2017 with 5.4 billion euros and has since held 64 percent of the shares that it has to surrender by the end of the year.

Now Italy has to obtain approval from Brussels to be able to pump more money into the crisis bank without having a scenario for the state to exit the MPS. The several hundred years old Monte dei Paschi is considered to be the largest restructuring case in the Italian banking sector.

Is there a plan B?

The government had long seen a merger with a stronger partner as the best solution for the Tuscan bank. UniCredit and Italy have been negotiating the details of a complex deal that would ultimately have meant the breaking up of Monte dei Paschi for months.

A source said the government could now work out a “Plan B”. They have already examined the possible advantages of MPS’s independence. The Ministry of Finance could make a capital increase of several billion euros. The government will probably reorganize the management at Monte dei Paschi and transfer the bad loans of the MPS to the state rescue company AMCO.

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