The Italian government and UniCredit are expected to cancel acquisition negotiations for troubled lender Monte dei Paschi di Siena (MPS), after attempts to reach a deal on costly recapitalization failed.
People involved in the negotiations on both sides said that Italy’s finance minister and UniCredit had failed to reach an agreement on the acquisition of Bank Tuscan. The decision is expected to be officially announced in the next few days.
One of the main obstacles during the latest round of negotiations was the amount of capital required from the government to inject into MPS, according to people involved in the talks.
“The Italian government considered the operation too costly. An Italian official said that the capital injection required by UniCredit would have been overstated.
The Italian Treasury, which bailed out MBS in 2017, must sell its stake in the world’s oldest bank by December 31 under conditions set by the European Commission.
Another person involved in the negotiations said, “It is clear that the chances of reaching an agreement are now close to zero.”
The fate of the MPS has sparked an internal conflict in the coalition government led by former European Central Bank chief Mario Draghi.
Earlier this week, the Treasury indicated it was unwilling to provide much more capital than its initial forecast of €2 billion to €2.5 billion, which would be raised.
First reported by Reuters and confirmed by people involved in the negotiations, Milan-based UniCredit will require up to €7 billion, a futile option for the Italian government.
“At this point, there is nothing left to do but walk away from the table for both parties. There is no room for dialogue anymore,” said one of the negotiators.
UniCredit plans to present a new business strategy in the last quarter of the year and told the Treasury that any deal related to MPS would need to be approved by the end of October as protracted negotiations delayed Investor Day.
Earlier this week, the Financial Times reported that the Italian government was trying to delay pressing deadlines on its sale to Monte dei Paschi di Siena as negotiations with potential acquirer UniCredit reached the main hurdle in the capital injection.
Unicredit declined to comment and the Treasury did not immediately respond