Meloni (Italy) closes the sale of 25% of Banco Monte dei Paschi for 920 million

Update Post: November 28, 2023 11:09 pm

The Banca Monte dei Paschi di Siena (BMPS) operation is activated, the historic Italian banking brand with more than 550 years of history. The Government of Giorgia Meloni went on the market this Tuesday to sell approximately 25% of the capital of the entity that is mostly in the hands of the state.

Specifically, the Italian State has earned some 920 million euros from the sale of part of its shares in BMPS as part of its plan to divest from the rescued and nationalized lender. Specifically, the Government has placed 314.9 million shares at 2.92 euros each, with a 5% discount on the closing price of Monte Paschi, the Ministry of Finance reported in a statement.

The size of the offering was increased from an initial planned provision of 20% due to strong demand among investors. The downward reaction of the shares reflects the discount made in the sale offer. The Monte dei Paschi registered a decrease of 5% on the Milan Stock Exchange. The brokers for the stock placement were UBS, Bank of America and Jefferies.

The transaction shows “market support for the ongoing restructuring and improved stock liquidity,” Citigroup analyst Azzurra Guelfi wrote in a report. “The market will remain focused on the next step of state exit/share reduction and the choice between further market placement and a possible merger/combination option.”

Participation from 64% to 39%

Italy began the process of selling Monte Paschi last month by hiring advisers, as Prime Minister Giorgia Meloni seeks to maximize the value of the state’s majority stake. The disposal can be made in one or more stages, through a public offering or through extraordinary operations, including a combination, the ministry said at the time.

Roma has long struggled to sell its 64% stake in Siena, Italy-based Paschi. Two years ago, the previous government tried unsuccessfully to combine Paschi with UniCredit SpA. However, progress made under CEO Luigi Lovaglio, who implemented a restructuring after years of restructuring, has made Paschi more attractive to investors.

The European Union allowed Italy to nationalize Monte Paschi in 2017 on the condition that it be reprivatized, with an initial deadline set for 2021, later extended to 2024.

The government has attempted to merge Paschi with a similar financial entity to create a new group that would retain the world’s oldest banking brand, Bloomberg reported in September.

Selling a minority stake ahead of such a deal would buy Meloni time and show it is committed to complying with EU rules. It would also make the remaining stake less costly for any potential partners, according to people with knowledge of the matter.

Founded in 1472, Monte Paschi has gone through years of painful efforts to reorganize its business. The bank was first bailed out in 2009 after being hit by bad loans and derivative deals gone wrong. In the following decade, it struggled to deliver consistent benefits, given limited room to maneuver under the terms set by the EU.

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November 21, 2023 7:45 pm