Italy Cap on M&A Tax Benefit Seen Delaying Bank Merger Wave
Italy plans to cap a fiscal benefit for merger and acquisition transactions, a potential blow to deal-making in the country’s financial sector that was tipped to kick start consolidation across Europe.
The government is willing to extend the benefit for another six months to June 2022, but limited the amount that can be claimed to 500 million euros ($583 million), Finance Minister Daniele Franco said at a press conference late on Thursday.
The cap “may dilute the fiscal benefit from M&A, capping the overall benefit that banks may have,” Fabrizio Bernardi, an analyst at Bestinver, said in a note. “We believe that the M&A season may be delayed at best by 6-12 months and we do not expect a deal to happen shortly.”
UniCredit SpA, Banco BPM SpA and BPER Banca Spa were seen as the main potential winners from the rule’s application. BPM and BPER shares led declines in Milan on Friday, both down more than 6%. Mediobanca analysts cut their recommendations on both stocks to neutral, citing the new cap.
The tax benefit was originally approved at the end of 2020 to entice potential buyers of state-owned Banca Monte dei Paschi di Siena SpA. The cap may delay or hamper an expected wave of Italian banking deals, after talks between UniCredit and Italy collapsed over the weekend.
“Strangely enough the cap has been introduced right after UniCredit has aborted the Paschi deal,” Fabrizio Bernardi, an analyst at Bestinver, said in a note.
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