Italy, UniCredit Said Near Restart of Paschi Takeover Talks

Italy and UniCredit SpA are set to restart talks within weeks on the potential takeover of Banca Monte dei Paschi di Siena SpA as the government seeks to exit the troubled lender by a year-end European Union deadline.

While the government is open to alternative solutions for Paschi, a takeover by UniCredit remains the preferred option, people with knowledge of the matter said, adding that meetings to resume government contact with Italy’s second-biggest bank may be scheduled as early as this month. The government would like to have an agreement in place as soon as this summer, one of the people said.

Talks with UniCredit for a possible takeover were halted earlier this year amid a government reshuffle and the exit of the Chief Executive Officer Jean Pierre Mustier, who was replaced by Andrea Orcel on April 15.

The executive may first look at a possible deal with Banco BPM SpA according to people with knowledge of his thinking, as Italy’s third largest bank would be one of the better fits for UniCredit, allowing it to expand in the rich Lombardy region. Monte Paschi may be taken over as well, even in a second step if the government offers the right conditions, the people said.

Italy, UniCredit Said Near Restart of Paschi Takeover Talks

Monte Paschi rose as much as 5.8% on the news and closed 2.6% higher in Milan trading, giving the bank a market value of about 1.2 billion euros ($1.5 billion.) UniCredit gained 0.7% to 9.35 euros, after earlier rising as much as 1.4%.

The government agreed with the European Commission to exit the bank by year’s end during its rescue of Paschi and plans to keep to that timeline, the people said. A spokesperson for the Treasury as well as representatives for UniCredit and Monte Paschi declined to comment.

The Treasury would propose UniCredit buying 51% of Paschi for a token price, while the ministry keeps a 13% stake, Il Messaggero reported on Saturday. The Finance Ministry would also be keen to ask regulators for a 6-month delay for the next exit deadline, the paper said. Messaggero also reported that UniCredit may consider buying Banco BPM in the fall.

Italy, UniCredit Said Near Restart of Paschi Takeover Talks

Burdensome Bailout

Monte Paschi has become a burden to the Italian government since it was first bailed out in 2009. Undermined by souring loans and derivatives deals that backfired, the bank was nationalized in 2017 through a 5.4 billion-euro ($6.6 billion) bailout from the government. Since then, it has struggled to deliver consistent profits given limited room for maneuver under terms demanded by the European Union in return for supporting the aid plan.

To lure buyers, Italy is mulling extending and boosting the fiscal benefits for banking mergers and acquisitions it introduced at the end of last year and that allows buyers to boost their capital by transforming deferred tax assets from the purchased bank into tax credits.

Orcel, a former UBS Group AG investment banker, signaled in his first public comments in the role this week that he’s open to pursuing takeovers, but only if they fit with his strategy and will boost growth.

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