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 Monte Paschi, which was saved from bankruptcy in 2017 with billions in taxes, by mid-2022 as agreed with the EU and to present a plan by the end of the year. In addition, the government must obtain approval from Brussels to be allowed to pump more money into the crisis bank without having a scenario for the state to exit the MPS.
Reuters had already reported on Saturday that the talks were about to fail after months of negotiations. The reason was the 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.
The Tuscan bank could now remain independent
A person familiar with the matter told Reuters on Sunday that Unicredit had demanded that the state should put a further 6.3 billion euros into the Monte Paschi in view of the necessary corrections in the books of the MPS. The Ministry of Finance has refused. In addition, Unicredit valued the parts of the MPS that it wanted to buy at only 1.3 billion euros. The Ministry of Finance assumed 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”. “The same framework that was offered to Unicredit could be applied to a ‘standalone’ plan,” he said. The government had examined the possible advantages of MPS’s independence, in which the Ministry of Finance would implement parts of the measures that had also been 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.