The potential sale of Italian nationalized crisis bank Monte dei Paschi di Siena (MPS) to competitor UniCredit has failed. Austrian bank Unicredit and the Economy Ministry said on Sunday evening that negotiations had stalled and would not continue any longer. According to insiders, dramatically different ideas about the financial aspects of the deal led to the failure.
The ending makes it difficult for Prime Minister Mario Draghi to sell Monte Paschi, which was rescued from bankruptcy in 2017 with billions of dollars in taxes, by mid-2022, as agreed with the European Union. In addition, the government must obtain approval from Brussels to be able to pump more money into the crisis bank without a scenario for the state to exit MBS.
Quarrel as a cause
Reuters news agency had already reported on Saturday that the talks were on the verge of failure after months of negotiations. The reason was the dispute over an expensive recapitalization of MPS, the insider said. Italy saved the world’s oldest bank from collapse in 2017 with 5.4 billion euros, and since then it owns 64 percent of the shares. The government has always viewed a merger with a stronger partner as the best solution for Bank Tuscan.
A person familiar with the matter told Reuters on Sunday that the two sides differed over financial issues. UniCredit demanded that the state put another €6.3 billion in Monte Paschi in view of the necessary corrections to the MPS’s books. The Ministry of Finance did not consider these amendments to be largely unjustified.
Unicredit does not want to comment
In addition, Unicredit valued the MPS parts it wanted to buy at only €1.3 billion. The Ministry of Finance, however, assumed from 3.6 to 4.8 billion euros. Thus, Unicredit’s demands would have thwarted the government’s goal of not selling MPS for less than its value. Unicredit did not respond to the information.
A source said the government could now come up with a “Plan B”. The person familiar with the considerations said, “No deal is currently possible under the terms of UniCredit. But the same framework that was introduced to UniCredit can be applied to a ‘stand alone’ plan.” The government has already considered the potential advantages of MPS independence, as the Treasury will implement parts of the measures that have also been submitted to UniCredit – including a multi-billion euro capital increase.
The last word
It is possible that the government will reorganize the management in Monte Paschi and transfer the bad loans from MPS to the state rescue company AMCO.
The Directorate General of the European Commission (DG-COMP) has the last word on the fate of Monte Paschi. This called for a plan to sell the crisis bank by the end of December. The extension of the hills can be visualized. According to insiders, the public administration is unlikely to abandon the sale order.