The reason for the termination are differences of opinion.
(Photo: Bloomberg)
London, Milan The possible sale of the nationalized Italian crisis bank Monte dei Paschi di Siena (MPS) to rival UniCredit has failed. The negotiations were broken off and would no longer continue, Unicredit and the Ministry of Economic Affairs announced on Sunday evening.
According to an insider, significantly different ideas about the financial aspects of the deal led to the failure. The end makes it difficult for Prime Minister Mario Draghi to sell the Monte Paschi, which was saved from bankruptcy in 2017 with billions in taxes, by mid-2022 as agreed with the EU. In addition, the government must obtain approval from Brussels to be able to pump more money into the crisis bank without having a scenario for the state to exit the MBS.
The Reuters news agency had already reported on Saturday that the talks were about to fail after months of negotiations. The reason was a dispute over a costly recapitalization of the MPS, insiders had said. Italy saved the world’s oldest bank from collapse in 2017 with 5.4 billion euros and has since held 64 percent of the shares. The government had long seen a merger with a stronger partner as the best solution for the Tuscan bank.
A person familiar with the matter told Reuters on Sunday that the two sides had disagreed on financial issues. Unicredit has demanded that the state should put a further 6.3 billion euros into the Monte Paschi in view of the necessary corrections to the books of the MPS.
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The Ministry of Finance did not consider these adjustments to be unjustified to a large extent. In addition, Unicredit valued the parts of the MPS that it wanted to buy at only 1.3 billion euros.
Could a “Plan B” follow?
The Ministry of Finance assumed, however, from 3.6 to 4.8 billion euros. Thus, Unicredit’s demands would have thwarted the government’s goal not to sell the MPS below value. Unicredit did not want to comment on the information.
A source said the government could now work out a “Plan B”. “No deal is currently possible under UniCredit’s terms. But the same framework that was offered to UniCredit could be applied to a “standalone” plan, ”explained the person familiar with the considerations.
The government has already examined the possible advantages of MPS’s independence, in which the Treasury Department would implement parts of the measures that were also offered to UniCredit – including a capital increase of several billion euros. The government will probably reorganize the management at Monte Paschi and transfer the bad loans of the MPS to the state rescue company AMCO.
The General Directorate of the European Commission (DG-COMP) has the last word on the fate of Monte Paschi. This has called for a plan to sell the crisis bank by the end of December. An extension of the ridge is conceivable. According to insiders, it is unlikely that the general management will give up the demand for a sale.
More: How Unicredit is fighting for the Monte dei Paschi crisis bank