Monte dei Paschi discusses UniCredit rescue in the fall

The Italian government and Unicredit are expected to close negotiations for the acquisition of troubled lender Monte dei Paschie de Siena (MPS), after trying to reach an agreement on an expensive recapitalization.

People involved in the talks on both sides said that the Italian finance minister and the Unicred Tuscan lender had failed to reach an agreement on the acquisition. The decision is expected to be officially announced in the next few days.

According to those involved in the talks, there was a major hurdle during the last round of talks on how much capital the government would need to inject into the MPS.

“The Italian government considered the operation very costly. The capital injection required by Unicred would have been greatly expanded, ”said an Italian official.

The Italian Treasury, which granted bail to MPS in 2017, must sell its stake in the world’s oldest bank by December 31, subject to conditions set by the European Commission.

“It is clear that the chances of a deal are now close to zero,” said another involved in the talks.

The fate of the MPS has led to infighting in the coalition government led by Mario Draghi, the former president of the European Central Bank.

Earlier this week, the Treasury indicated that it was unwilling to provide much more capital than the initial projection of 2bn to € 2.5bn, which would be raised.

As previously reported by Reuters and confirmed by those involved in the talks, Milan-based Unicredit will need up to € 7bn, an unlikely option for the Italian government.

One negotiator said, “At the moment there is nothing for both parties to do but walk off the table. And there is no opportunity for dialogue. ”

Unicred plans to introduce a new business strategy in the fourth quarter of the year and has told the Treasury that any deal on MPS must be agreed by the end of October as long negotiations hold its investor day.

Earlier this week, the FT reported that the Italian government was trying to delay the deadline to put pressure on its Monte de Paschie de Siena sale because negotiations with Unicred had stumbled on a major capital injection.

Unicred declined to comment and the Treasury did not immediately respond

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