Italy Budget Committee Set to Keep Sweetener Key to Paschi Sale

Italy’s budget commission is expected not to accept a proposal to cap a sweetener for large M&A deals, removing a key hurdle to the sale of struggling lender Monte dei Paschi di Siena SpA to UniCredit SpA, according to people familiar with the plans.

Lawmakers within Prime Minister Giuseppe Conte’s governing coalition had tried to limit a tax break in the draft budget, which would apply to mergers done next year. Such a cap would make Paschi less attractive to buyers and stall plans by Italy’s finance ministry to sell it quickly to UniCredit.

The decision is expected by Sunday, although the process has been delayed several times, the people said.

The tax relief is a key component in a package of incentives for potential Paschi buyers and could be worth as much as 3 billion euros ($3.7 billion), the people said. The limit proposed by lawmakers in the Five Star Movement, the senior party in Italy’s governing coalition, would have limited the tax benefits to 500 million euros, or only allowed it for companies with fewer than 50 employees, the people said.

Five Star has argued that Italy would be better off keeping Paschi and running it as a state bank rather than honoring its commitment to the European Union to privatize the lender once it is cleaned up.

The Finance Ministry wants to proceed with the sale in early 2021 and is ready to inject at least 2.5 billion euros into Paschi. It is also studying measures to shield potential buyers from legal risks and integration costs.

©2020 Bloomberg L.P.

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