Italy, UniCredit making progress on Paschi sale by end-2021

Bloomberg

The Italian government and UniCredit SpA are making progress in talks on a deal for the takeover of troubled lender Banca Monte dei Paschi di Siena SpA and could sign a preliminary accord by the end of the year.
The Rome-based Finance Ministry is working to meet UniCredit’s demands in a deal that may cost the state more than 10 billion euros ($12 billion).
Talks are expected to accelerate after elections for a parliamentary seat in Siena on
October 3 and October 4, the people said. The details of the sale won’t be finalised until after the vote, they said. While the sale remains the primary plan for Italy’s government, talks could still fail.
Monte Paschi shares rises as much as 4.2% in Milan following the Bloomberg report. The bank’s riskiest bonds gained, paring earlier losses. A 750 million-euro 5.375% note maturing in 2028 climbed 0.25 cents to 76 cents on the euro; earlier it was down as much as 0.5 cents.
Italian newspapers earlier this week had cast doubt on the notion of progress towards a deal, with daily La Stampa reporting that Italy was weighing a backup plan without UniCredit. Added conditions from UniCredit and pressure from political parties risked putting a deal on hold, Stampa said.
A timeline producing a deal by the end of 2021 would allow UniCredit to benefit from a tax break introduced last year for mergers and acquisitions in the banking industry. Closing a deal that qualifies for the measure, which expires at the end of this year, would be worth billions of euros to UniCredit.
The government led by Prime Minister Mario Draghi has been working for months on a plan to sell Monte Paschi, the world’s oldest bank, which the state bailed out in 2017.
But progress has been slowed by political opposition and the upcoming vote in Siena, where the electoral campaign has focused on the future of the lender, a big employer in the region.
Voters in Siena will select a lawmaker to replace Pier Carlo Padoan, a former finance minister who last year stepped down from the region’s seat in parliament to become chairman at UniCredit.
A deal with UniCredit might not include the Paschi name, which many in Siena see as a symbol of the city and its surrounding region, meaning the brand could simply disappear. That’s further fuelled political opposition to a deal.
Democratic Party leader Enrico Letta has joined other candidates for the seat in insisting that a deal with UniCredit should be pursued only if it doesn’t come at too steep a price for Italy.
Indeed, meeting Orcel’s conditions could prove costly, with the possibility of thousands of job cuts, many at the bank’s Siena headquarters. And for local residents, the loss of an iconic brand could be even harder to swallow.