Shares of Italian bank Carige tumble after BPER chooses bailout deal

The Carige Bank logo is seen in Rome, Italy on April 9, 2016. REUTERS / Alessandro Bianchi / File Photo

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  • Deal would solve long-standing banking conundrum
  • BPER in the process of expansion, to become the 4th largest bank by assets
  • An agreement that will cost 530 million euros to healthy lenders
  • Carige share plunges 10.5%, BPER share up

MILAN, Jan.11 (Reuters) – Shares of Italian bank Carige (CRGI.MI) fell more than 10% on Tuesday after national rival BPER Banca (EMII.MI) was granted exclusive rights to discuss a acquisition of the troubled lender.

FITD, the Italian banking fund which has held Carige since a bailout in 2019, chose BPER on Monday against rival offers from Crédit Agricole Italia (CAGR.PA) and the American fund Cerberus, to negotiate a sale which he hopes will will end a seven-year crisis at the Bank.

Carige stock had gained more than a third since mid-December following news of interest from BPER and Crédit Agricole Italia, and was trading well above the price of the BPER takeover bid of 0 , 80 euro.

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They fell 10.6% at the start of Tuesday’s session to 0.7996 euros, triggering an automatic suspension of trade.

BPER, Italy’s fifth-largest bank, was the preferred bidder, with authorities in the country favoring mergers between mid-level lenders while some FITD members wary of further expansion of Crédit Agricole Italia, the largest lender foreigner from the country.

Carige and its biggest rival Monte dei Paschi di Siena (BMPS.MI) are the two main banking headaches preventing Italy from completing a restructuring that began in 2015 that cost healthy lenders more than 10 billion euros ( $ 11 billion) in rescue aid.

After failing last year to sell state-owned Monte dei Paschi to heavyweight UniCredit (CRDI.MI), Italy filed € 380 million in gross tax incentives to facilitate the divestiture of Carige.

At the end of a meeting of its steering committee on Monday, the FITD fund, which owns 80% of Carige, indicated that BPER would have four weeks to study the financial data of the target in order to agree on a sale no later than February 15.

Italian banks have spent 600 million euros to save Carige via the FITD fund, which must now inject more money into it to get rid of it.

The suitors BPER, Crédit Agricole Italia and Cerberus had all offered a token of 1 euro and asked for liquidity to cover the costs of restructuring and remediation.

After initially requesting a capital injection of one billion euros, which the FITD rejected because it exceeded the 700 million euros it could spend, BPER announced on Monday that it had reduced the request to 530 million. euros.

Thanks to the tax incentives, BPER said it still expects the deal to have a neutral impact on its capital reserves and significantly increase earnings per share from 2023.

BPER would then buy the remaining investors of Carige at 0.80 euro per share.

BPER shares rose 1.5% on Tuesday.

“The terms of the deal are a little less attractive than initially presented,” Citi analysts said. “But we believe the deal still represents an opportunity for BPER.”

“This potential deal is another step in Italian banking consolidation and the removal of one of the industry’s main overhangs.”

Citi said BPER will focus on cutting costs for Carige, which increased 93% of revenue as of September 30.

Last year, the Italian branch of Crédit Agricole Français bought out the small counterpart Creval for 1 billion euros and in 2017 concluded a bailout agreement with FITD for three failed banks.

BPER was embarked on a path of expansion by its benchmark shareholder, insurer UnipolSAI (US.MI), and last year strengthened its assets by 40% by buying branches sold as part of the takeover of UBI by Intesa Sanpaolo (ISP.MI).

Carige would further bring BPER’s assets to around € 155 billion, making it Italy’s No.4 bank and a more direct competitor of Banco BPM (BAMI.MI), No.3 and a merger partner long possible before the last talks collapse. year.

Analysts said the deal with Carige further reduces the already slim chances of a BPER-Banco BPM merger, while BPER remains a candidate to buy out its smaller counterpart Popolare di Sondrio of which UnipolSAI is also a major shareholder.

BPER worked with Rothschild, while KMPG and Deutsche Bank advised FITD.

(This story has been passed on to add the name of the Italian bank fund in paragraph 2)

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Editing by David Goodman and Susan Fenton

Our standards: Thomson Reuters Trust Principles.

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