It took just a few hours for Prime Minister Giorgia Meloni to kick off the sale of a $1 billion stake in Banca Monte Paschi di Siena SpA which had been years in the works.
Soon after a ratings decision by Moody’s Investors Service on Friday capped a series of such assessments, her government jumped on an expected boost in market sentiment to green light the sale of the stake in the world’s oldest bank, according to people familiar with the matter.
Over the weekend, the government decided to act on a plan discussed with its advisers UBS Group AG and Jefferies for a quick disposal of a stake in Paschi. Among the factors behind the move was an improving spread between 10-year Italian and German bonds, a key measure of risk in the region, said the people who asked not to be named on a confidential issue.
Successive governments have long tried to find a way to sell a controlling stake in Paschi. The bank was first bailed out in 2009 after it was hit by souring loans and derivatives deals that backfired. In the following decade, it struggled to deliver consistent profit, given limited room for maneuver under terms set by the European Union.
The transaction allows the government to immediately cut Italy’s debt mountain by €920 million ($1 billion) and came just hours ahead of assessments by the European Commission, the EU’s executive, on national budgets for 2024.
An official briefed on the matter said a key condition for kicking off the sale was Italy’s latest budget and its financial management. Representatives for UBS and Jefferies declined to comment.
The finance ministry offered a 20% stake on Monday evening, after the market close. Demand turned out to be five times the size of that offer, prompting the government to boost the stake to 25%, the people said. Italy sold 314.9 million shares for €2.92 a piece, with a 5% discount on Monday’s closing price.
Following Monday’s sale, Italy has shrunk its stake in Paschi from 64% to 39%, which could pave the way for creating a third Italian banking group, as planned by Meloni. A smaller state holding could facilitate an M&A deal.
The EU allowed Italy to nationalize Paschi, based in Siena in Tuscany, in 2017 on condition it be re-privatized with an initial deadline set for 2021. Meloni’s predecessor Mario Draghi asked the EU to extend a deadline to sell the state’s controlling stake to the middle of 2024.
A turnaround under Chief Executive Officer Luigi Lovaglio, after years of restructuring, has turned the bank into an asset and not a burden.
Earlier this month, Paschi shares hit their record high since a €2.5 billion capital increase completed a year ago. Shares closed at €3.17 on Nov. 16, marking an increase of about 60% compared to the offer price of €2. The share sale was part of Lovaglio’s turnaround plan.
(Updates with Jefferies no comment in sixth paragraph.)
Author: Sonia Sirletti, Chiara Albanese and Alessandra Migliaccio
