EXCLUSIVE Italy and UniCredit close to ending talks over MPS sale-sources

LONDON, Oct 23 (Reuters) – Italy’s authorities and UniCredit (CRDI.MI) are getting ready to name off negotiations over the sale of ailing financial institution Monte dei Paschi (MPS) (BMPS.MI) after efforts to succeed in an settlement over a pricey recapitalisation plan failed, two sources informed Reuters.

The choice would complicate efforts by Prime Minister Mario Draghi’s authorities to fulfill a mid-2022 deadline agreed with European Union authorities to re-privatise the financial institution Rome rescued in 2017.

Italy has lengthy seen a merger with a stronger peer as the perfect resolution for the Tuscan financial institution, which has plans to boost 2.5 billion euros ($2.9 billion) in capital subsequent yr.

However the sources mentioned the phrases of a possible sale agreed by UniCredit and Italy’s Treasury after they entered unique negotiations on July 29 have made the merger plan too pricey an alternative choice to a stand-alone recapitalisation.

A recapitalisation bundle value greater than 7 billion euros had appeared “too punitive” for Italian taxpayers after they spent 5.four billion euros to salvage the financial institution 4 years in the past, in response to one of many sources.

Rome will now have to achieve clearance from Brussels to pump extra money into Monte dei Paschi with no plan in hand to chop the state’s 64% stake. It’ll even have to barter a brand new settlement with European authorities over the exit.

UniCredit, Italy’s No. 2 lender, and the Treasury declined to remark.

UniCredit had began discussing a potential buy of MPS beneath earlier CEO Jean Pierre Mustier. However his successor, Andrea Orcel, who took over in April, raised the bar, focusing on a deal for less than essentially the most worthwhile elements of the financial institution. read more

UniCredit had mentioned it needed solely MPS’ branches in wealthier northern and central areas, and wouldn’t take any soured or dangerous loans or dangers stemming from mismanagement.

EVALUATION GAP

After concluding its due diligence evaluation in September, UniCredit introduced the Treasury with detailed calls for primarily based on the July phrases earlier this month. It aimed to succeed in a choice earlier than an Oct. 27 board assembly to approve quarterly outcomes.

The sources mentioned the events had discovered it inconceivable to bridge the hole of their evaluations of MPS’ recapitalisation wants, a distinction that one particular person put at 2.5 billion euros.

To complicate issues, disagreements resurfaced this week over the belongings to be bought, with the federal government pushing to incorporate MPS’ capital companies arm and its leasing and factoring unit, two sources had mentioned.

As well as, negotiators haggled over the way in which UniCredit calculated its honest worth changes on MPS liabilities, which grew to become one other main stumbling block together with the scale and prices of job cuts that Italy had to offer for, the primary supply mentioned.

“No deal is feasible beneath UniCredit’s circumstances proper now. However the identical framework that was provided to UniCredit may very well be utilized to a standalone plan,” the supply mentioned.

Rome has already reviewed the potential advantages of a standalone technique, which might see the Treasury implementing elements of the measures provided to UniCredit, together with a capital enhance value a number of billion of euros, this supply mentioned.

If the standalone plan goes forward, MPS may also be rid of its remaining soured loans – which might go to state-owned unhealthy mortgage supervisor AMCO – and any non-ordinary authorized dangers which might be carved out and assured by the state.

Underneath the plan ready by Treasury advisers Financial institution of America and Orrick for the sale to UniCredit, MPS’ authorized dangers stemming from mismanagement could be transferred to state-owned Fintecna, a confidential doc seen by Reuters had proven. read more

($1 = 0.8593 euros)

Further reporting by Giuseppe Fonte in Rome; Enhancing by Frances Kerry and Mike Harrison

Our Requirements: The Thomson Reuters Trust Principles.