(Bloomberg) -- Italy sold about 12.5% of Banca Monte dei Paschi di Siena SpA for about €650 million ($704 million) as part of a state plan to divest from the bailed-out lender.

The government led by Prime Minister Giorgia Meloni sold 157.5 million shares for €4.15 each, with a 2.5% discount on Monte Paschi’s closing price, the Finance Ministry said Tuesday in a statement. The pricing is 42% higher than the government’s previous placement in November.

Monte Paschi shares fell as much as 3.1% in early trading in Milan on Wednesday.

The sale left Italy with a 26.7% stake. BofA Securities, Citigroup Global Markets Europe AG, Jefferies and Mediobanca acted as joint global coordinators and joint bookrunners.  

The proceeds from the disposal will be used to cut Italy’s mammoth debt, feeding into a €20 billion privatization program launched by the right-wing administration. 

What Bloomberg Intelligence Says:

Italy’s disposal of another 12.5% stake in Monte Paschi will lower its holding to below 27%, still high but a step closer to making the world’s oldest bank a potential M&A target. The CEO has repeatedly called for consolidation in Italy’s banking sector after the lender’s well-executed recovery plan.

— Lento Tang, Ilia Shchupko, BI analysts. for the full note click here.

Italy began the process of exiting Monte Paschi in November by selling 25% of the bank for about €920 million, a notable win for Meloni’s government.

Founded in 1472, Monte Paschi has undergone years of painful efforts to turn its business around. 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 limits the European Union set in exchange for nationalization in 2017. 

Rome has long struggled to sell its controlling stake in Siena-based Paschi. Three years ago, the previous government tried and failed to combine Paschi with UniCredit SpA. But progress made under Chief Executive Officer Luigi Lovaglio — who implemented a turnaround after years of restructuring — has made Paschi more appealing to investors. 

--With assistance from Erin Fuchs and Flavia Rotondi.

(Updates with shares in third paragraph.)

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