(Bloomberg) -- A little over a week ago, Italian Finance Minister Giancarlo Giorgetti approached some of the country’s wealthiest investors to finally pull off what his predecessors failed to do: Return Banca Monte dei Paschi di Siena SpA to private ownership while keeping it Italian.
Among those listening to his pitch were Francesco Gaetano Caltagirone, the billionaire owner of the Messaggero newspaper, and the Del Vecchio family, founders of Ray-Ban maker EssilorLuxottica SA, according to people familiar with the matter. In the course of 10 days, Giorgetti also spoke to executives at Banco BPM SpA and got the green light from the Bank of Italy and European Central Bank.
By 6 p.m. on Wednesday, the Finance Ministry announced the sale of an initial stake in Monte Paschi, which snowballed to 15% as the night went on. The Caltagirone Group took 3.5% as did the Del Vecchio family, Bloomberg has reported. Banco BPM got 5% and Anima Holding SpA, the asset manager being acquired by BPM, took 3%.
It was a move typical of Italian capitalism, in which banks like Mediobanca SpA are run through shareholders’ agreements, often with the blessing of governments. A major step in Premier Giorgia Meloni’s pledge to divest stakes in key companies while keeping them Italian, it also stood in stark contrast to Berlin’s botched sale of a holding in Commerzbank AG, which has left the German lender contending with an unsolicited approach by Italy’s UniCredit SpA.
“In the end, the government managed to disentangle itself from the bank without giving it to a foreign group,” said Mario Comana, a professor in banking at Luiss university in Rome.
Monte Paschi’s new shareholders are among the most important investors in Italy’s financial services industry. Caltagirone and the Del Vecchio heirs own large stakes in the country’s biggest insurance firm, Generali SpA, and investment bank Mediobanca.
Caltagirone and the late Leonardo Del Vecchio previously teamed up in an ultimately unsuccessful bid to replace Generali Chief Executive Officer Philippe Donnet. Caltagirone also supported a minority list of board candidates presented by Del Vecchio’s holding company Delfin Sarl at Mediobanca.
The Monte Paschi deal positions BPM to become a top shareholder, with analysts speculating that the two may eventually combine. Shares of both lenders rose on Thursday, with BPM gaining 3.1% and Monte Paschi jumping almost 12%.
Giorgetti’s goal was to set the stage for the creation of a third large banking group in Italy, according to the people, who asked for anonymity discussing private information. BPM will control about 9% of Monte Paschi if its bid for Anima goes through. That could set the groundwork for it to buy more shares later on, while also creating a barrier for other banks that may have been considering an investment in Monte Paschi.
BPM said in a statement it doesn’t plan to seek permission to boost its holding to over 10%. Representatives for the Caltagirone Group and the Del Vecchio family declined to comment.
“We would not completely rule out a takeover of Banca Monte dei Paschi di Siena by Banco BPM in a year’s time,” JPMorgan Chase & Co. analyst Delphine Lee wrote in a note to clients.
Giorgetti himself had promised consolidation in the sector in a recent interview with Bloomberg, in which he said a stake in Paschi would be sold by the end of the year.
“Monte Paschi can and must play a role in shaping what the Italian banking sector will become in future,” he said.
Monte Paschi, the world’s oldest lender, was repeatedly pushed to the brink of collapse by souring loans before years of restructuring, nationalization, billions of euros in fresh capital and higher interest rates ultimately turned it around. Italy still owns a stake of 11.7% after Wednesday’s sale.
Prior governments tried and failed to find a buyer, including that of former European Central Bank chief Mario Draghi. Three years ago, Draghi failed to sell Monte Paschi to UniCredit, despite intense negotiations and the use of moral suasion on the part of the government. UniCredit Chief Executive Officer Andrea Orcel at the time insisted Monte Paschi required more capital injections before he would buy it.
The breakdown of the talks forced Italy to ask the European Union for more time to complete the restructuring of Monte Paschi and sell its stake in the troubled lender. Italy has been under pressure to exit to comply with EU requests to privatize following the 2017 bailout.
Orcel has since taken a large stake in rival Commerzbank, taking some in the German government by surprise when he outbid everyone to pick up the entire 4.5% stake Berlin was trying to sell to the market. Authorities in Berlin are struggling to find ways to scuttle a potential takeover, after UniCredit raised its stake further.
Italy’s Industry Minister Adolfo Urso has backed a potential takeover, adding to tensions between Berlin and Rome over the matter. Italian Foreign Minister Antonio Tajani has suggested double standards are at play, saying “when someone comes to buy in Italy, they say that we are in a European system — then if an Italian buys, it is no longer a single market.”
While Meloni for now has succeeded in protecting Italy’s banking groups from foreign interests, she’s also shown a willingness to abandon those principles when needed. Italy and Deutsche Lufthansa AG this week ironed out differences over a plan by the German airline to acquire ITA Airways. A sale would allow Meloni to offload responsibility for an airline whose predecessor, Alitalia, was a drain on state resources for decades.
Comana, the banking professor, said a key factor why the Monte Paschi deal went ahead this time wasn’t necessarily negotiating skills, but likely the support for banks from higher interest rates in recent years.
“That surge has meant that even a solely commercial bank such as MPS has returned to profitability, and therefore become palatable again,” he said.
(Updates with details on the investors in sixth and seventh paragraph. A previous version of the story corrected the day of the share price reaction.)
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