By Valentina Za and Giuseppe Fonte
MILAN (Reuters) – Monte dei Paschi di Siena faces a tight schedule to secure major shareholders’ sale of up to 2.5 billion euros ($2.4 billion) after an election pause during which non-compliant investors ended on Monday.
After leading the Conservative coalition to victory in Sunday’s vote, Giorgia Meloni appears set to become Italy’s first female prime minister at the head of the most right-wing government since World War Two.
The MPS is in good hands, said Maurizio Liu, chief economic adviser to Italian Brotherhood leader Meloni.
“We trust CEO Luigi Lovaglio to follow through on the deal. He has the experience and he can make it happen,” he told Reuters.
MPS faces the challenge of raising more than eight times its current market value of €300m, five years after a bailout that provided €8.2bn of capital.
This means that they are not able to offer a significant discount on new shares and will be of higher value than competitors.
State-owned MPS aims to launch the issue of new shares on October 10, in order to raise the money it needs in time to lay off about 3,500 employees using early retirement rules that expire after November.
Sources said Lovaglio has delayed the participation of insurer Axa and asset manager Anima Holding, despite MPS’s major business partners willing to play a role in the recapitalization.
With Anima set to offer up to €200 million in cash as part of an enhanced business partnership with MPS, it is likely that the Tuscan bank will need France’s Axa to contribute as much in order to proceed with the deal, two people close to the matter said.
The state will cover 64% of the MPS’ capital increase, but the rest must come out of private hands under EU rules that restrict state aid to lenders.
After a standoff that has upset some of the eight banks in the MPS underwriting consortium, Lovaglio finally agreed to meet with top executives from Anima and Axa in London last week.
But no financial details have yet been confirmed with either party, which means time is tight especially when it comes to reviewing the anima contracts with MPS, one person said.
Unlike Anima, Axa won’t change its “bank insurance” joint venture with MPS, but simply buy insurance contract portfolios, allowing MPS to anticipate future revenue, people said.
All parties involved declined to comment.
The banks that regulate the sale of shares see the participation of core investors as essential. They can walk away from a proper underwriting commitment if a sale is unlikely to be successful based on feedback from investors.
The cash call before a new government is formed is likely to be completed at the end of October or early November, and the bid is expected to run for three weeks from October 10.
Meanwhile, MPS shares failed to trade on Monday after a reverse stock split to clear the way for a capital increase. The Italian Stock Exchange said after the markets closed that it would not allow orders on MBS shares without a price limit.
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