Sources told Reuters that Italy’s Treasury has selected Bank of America (NYSE:BAC) and Orrick as financial and legal advisers to secure a merger deal for bailed-out bank Monte dei Paschi (MPS) as part of its privatization plan. In order to provide a long-term solution to the bank. Rome aims to settle a merger with a healthier peer in 2021. This has been supported by the government since 2017, following an 8 billion euro rescue deal.
The mandates, which will last one year, will see Bank of America’s co-head of the financial institution group, Giorgio Cocini, and Orrick’s partners Patrizio Messina and Marco Nicolini working side by side with the Treasury to attract buyers and address the bank’s capital shortfalls.
The sources said that Rome will pay around 150,000 euros in financial and legal fees, with the lion’s share going to Bank of America. Italy’s Treasury and Orrick were not were not available to comment, while Bank of America had no desire to comment.
MPS is a difficult sell in Italy’s banking market, which has a surplus of branches and has seen a rise in loan losses and remote banking in the COVID-19 pandemic.
Sources say, UniCredit is seen as the preferred buyer for the Bank, even though boss Jean Pierre Mustier has ruled out mergers which, he has said, only add “branches and staff.”
Banco BPM, the third largest bank in Italy, is in the process of scouting possible link-ups and may also emerge as a workable bidder for MPS. Any deal for the Tuscan bank would only come after the Treasury acts to remove legal claims amounting to 10 billion euros, while also injecting fresh capital. Sources said, Rome has set aside 1.5 billion euros to shore up MPS but the bank faces a shortfall of at least 2 billion.