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Monte Paschi Pushes Ahead With $4 Billion Share Sale

Banca Monte dei Paschi di Siena Headquarters in Siena
Pedestrians and a bicyclist stand outside the headquarters of Banca Monte dei Paschi di Siena SpA in Siena. Photographer: Alessia Pierdomenico/Bloomberg

Banca Monte dei Paschi di Siena SpA, the bailed-out Italian bank, is pressing ahead with a share sale of as much as 3 billion euros ($4 billion) to help repay state aid and avert nationalization.

The rights offer will be completed by the end of the first quarter, Italy’s third-largest lender said in a statement from Siena. The stock has dropped 13 percent over two days.

Monte Paschi, engulfed in legal probes of alleged misconduct by former managers, is tapping investors after Chief Executive Officer Fabrizio Viola pledged to reimburse the state next year and cut an additional 3,360 jobs to win European Union support for a restructuring plan. The European Commission, the EU’s executive arm, is due to make a decision on whether to approve the plan by the end of the month.

The Italian bank will ask shareholders to approve the capital raising and give managers the mandate to set terms on the sale at a meeting set to start on Dec. 27. Monte Paschi plans a reverse share split grouping 100 shares for 1 prior to the stock sale, it said.

The maximum size of the rights offering exceeds Monte Paschi’s current market value of 2.15 billion euros. The shares fell 5.9 percent to 18.4 cents in Milan trading today.

Stock Penalized

Viola said earlier this month that the sale could take place at the start of the year, in June or at the end of 2014. “But everything is possible,” he told analysts on a call.

“Management is accelerating the sale plan and this is penalizing the stock,” Fabrizio Bernardi, a Milan-based analyst at Fidentiis Equities, said by telephone.

Nineteen of 22 analysts recommend selling Monte Paschi shares compared with 14 of 23 analysts at the start of the year, data compiled by Bloomberg show. The average 12-month estimate for the shares is 16 cents.

There is still uncertainty about the bank’s plan to repay state aid, said Riccardo Rovere, an analyst at Mediobanca SpA in Milan, who has a neutral stance on Monte Paschi stock.

UBS Coordinates

Monte Paschi hired 10 banks to manage the sale. UBS AG will act as global coordinator and bookrunner, while Citigroup Inc., Goldman Sachs Group Inc. and Mediobanca will be co-global coordinators and joint bookrunners. Barclays Plc, Bank of America Corp., Commerzbank AG, JPMorgan Chase & Co., Morgan Stanley and Societe Generale SA will also act as bookrunners.

The bank, which hired UBS as an adviser for the sale last month, reported a sixth straight quarterly loss in the third quarter. State aid costs and provisions for bad loans weighed on earnings.

While Monte Paschi prepares for the sale, prosecutors are probing whether former managers at the firm, which piled up losses of about 8 billion euros in the past two years, used derivative contracts to obscure more than 700 million euros of losses, as first revealed by Bloomberg News in January.

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