Paschi Said in Advanced Talks With Warburg for Belgian Unit

(Bloomberg) -- Banca Monte dei Paschi di Siena SpA is in advanced negotiations to sell its Belgian business to private equity firm Warburg Pincus, people with knowledge of the matter said.

The Italian bank, advised by Rothschild & Co., is close to reaching an agreement and a deal may be announced as soon as next week, the people said, asking not to be identified because the talks are private. The transaction may value the unit at almost 50 million euros ($58 million), they said.

Monte Paschi agreed to sell the Belgian business as part of an agreement reached with the European Commission last year that allowed the Italian government to inject 5.4 billion euros in aid as part of an 8.3 billion-euro recapitalization. Monte Paschi is also seeking to sell its French unit to comply with regulators’ requests.

“It’s an important step forward in the bank’s effort to revamp its business that it complies with regulators’ requests,” said Wolfram Mrowetz, head of Italian broker Alisei SIM. “That said, it’s still a long way to go until they restore profitability, a path complicated by the current political and macro environment.”

Monte Paschi, undermined by souring loans and derivatives deals that backfired, requested state aid after it failed to raise funds from private investors. Chief Executive Officer Marco Morelli is seeking to restore the lender to long-term profitability by cutting jobs and branches and improving asset quality.

Monte Paschi rose as much as 2.2 percent in Milan trading and was up 0.6 percent to 2.07 euros as of 9:20 a.m., giving the bank a market value of 2.35 billion euros.

Monte Paschi Belgio is a Brussels-based unit with eight branches. It offers customers a range of financial products and banking services including bank accounts, investment and financing to individuals and corporate.

Officials for Monte Paschi and Warburg Pincus declined to comment.

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