Italy Pushes UniCredit to Take on Paschi Units as Deadline Nears
(Bloomberg) -- Italy is trying to convince UniCredit SpA to take on more businesses in a takeover of Banca Monte dei Paschi di Siena SpA, while the government and the bank are still haggling over the amount of capital that needs to be injected as both sides rush to get a deal in place by next week.
Negotiations between the government and UniCredit are entering a critical phase as both sides seek to reach an in-principle agreement by Oct. 28, people with knowledge of the matter said. Government officials will have fresh meetings as soon as Friday on a Monte Paschi capital increase, where both sides stand furthest apart, the people said. The Treasury is seeking to inject about 5 billion euros ($5.8 billion), while UniCredit wants more than 7 billion euros, they said.
The government is also now pushing to include Paschi’s leasing and factoring businesses in the deal after a meeting on Thursday, according to one of the people. That last-minute change to the so-called perimeter of assets to be transferred has further complicated the talks, the people said.
Almost 15 years after the disastrous acquisition of Banca Antonveneta SpA that signaled the beginning of Monte Paschi’s downfall, the bank is facing a reckoning that will effectively end its more than five centuries of existence. Prime Minister Mario Draghi’s government has focused on finding a solution to the saga since taking office in February, even in the knowledge that it could ultimately cost taxpayers billions of euros.
Asked if there would soon be a solution late Friday, Draghi said: “I am unable to respond, because I don’t know.”
UniCredit Chief Executive Officer Andrea Orcel is seeking to have a deal in place to announce to investors and allow him to move forward with the bank’s strategic update due in November.
For Italy, the timeline is also less urgent, as the government is drafting its budget law for next year, and it will be chairing the G-20 leaders summit on Oct. 30 and 31. Italy rescued the bank four years ago and has to divest its stake by the end of the year under European Union rules, though it doesn’t plan to ask for a delay of its exit, people with knowledge of the matter have previously said.
Spokesmen for UniCredit and the finance ministry declined to comment.
Italy’s government is confident that it will be ultimately able to work out a deal for Monte Paschi as UniCredit is too committed to back down, but it still sees UniCredit’s request on the capital increase as too high, the people said. On the other side, sources close to bank said that the deal will likely fall apart if the government’s final proposal doesn’t comply with more conditions agreed in July that the deal should be capital neutral for UniCredit and help it generate higher profit.
The amount plugged into the bank should restore Monte Paschi’s capital buffers and cover the costs of job exits, bad loan sales and legal risks, affording up to 2 billion euros of fiscal benefits UniCredit will have by buying Paschi. The government is set to extend a deadline to benefit from tax relief from the end of the year to June 2022, in order to get extra time to negotiate the final details of the sale, according to two people familiar with the matter.
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