Luigi Lovaglio, number one of Mps Monte dei Paschi, under pressure to secure the support of Axis is the Soul, its commercial partner, in the 2.5 billion euro capital increase, which the CEO would like to conclude as soon as possible. Too bad that, according to what emerges from sources close to the banks of the guarantee consortium, this operation it would not yet have garnered interest from private investors.
Reason? The uncertainty represented by the imminent Italian political elections next September 25th.
Even investors who have long-term relationships with Lovaglio, such as Denis Dumont, they would like to wait for the outcome of the elections before giving their assist, according to a source, to the recapitalization of Monte.
Consequentially the banks of the underwriting syndicate they are putting pressure on the CEO of MPS – three sources close to the dossier report to the Reuters news agency – to ensure the support of business partners Axa and Anima. Their eventual participation in the recapitalization could indeed convince other private market operators to purchase those new shares that MPS is preparing to issue.
Mps, Lovaglio cautious on Anima and Axa. Here because
The Reuters article recalls how the CEO of Mps Luigi Lovaglio initially resisted the option of dealing with Axa and Anima regarding their participation in the recapitalization operation, despite the interest shown by both partners in investing in the Sienese bank, in order to strengthen the commercial alliances already signed.
Lovaglio’s reluctance is explained by awareness than closer ties with Axa and Anima could hinder the future search for a partner with which to start a merger, something on which MPS would like to commit itself – to finally allow the exit of the State, which is still confirmed as its majority shareholder with a 64% stake – immediately after raising new capital.
The problem is that the banks that are part of the underwriting syndicate for the capital increase and who are organizing the share issue are asking, as had already been reported by some sources, that there are anchor investors to support the operation. Given the current market prices, these banks in fact face the difficult task of placing new shares at more expensive multiples than banks that are decidedly more solid than MPS, such as UniCredit for example. (with which, among other things, the Monte di Stato was about to get married, before the negotiations made a flop hard to forget).
An article from Il Sole 24 Ore explained the question of the price of the shares to be placedrecalling how the market capitalization of Mps is around 374 million euros: a value that presents a significant gap compared to the 2.5 billion euros that the bank wants to raise: “a monster figure”, as the Confindustria newspaper commented, specifying:
“Monstrous figure that compares itself with a market capitalization currently equal to 374 million, numbers that make the operation more complicated, since they will prevent the issue of new shares at a significant discount compared to the values net of the option right “. It’s still: “As reported by press rumors, which cite the first calculations circulated among the banks of the guarantee consortium, it will not be possible to offer a discount on the Terp higher than 13%,” a fraction of that granted in similar cases “”.
In short, the prices would entail “unattractive multiples for potential subscribers: there is talk of about 0.4 times the assets, valuation higher than that of banks like Banco Bpm and Bper“.
In the last few hours, Reuters reported the news of the informal meetings initially reported by Bloomberg News, between Lovaglio and the executives of Axa and Anima. Two sources told Reuters that Lovaglio agreed to deal with counterparties again next week. However, it remains unclear whether the negotiations will lead to an agreement. And it’s worth remembering that 900 million-1 billion private capital must be found, net of the 1.6 billion that will be placed by Mef, the largest shareholder of Monte dei Paschi.
Today, the MPS stock records a solid rise, with investors who they bet (or just hope) on an investment by Anima and Axa in the capital increase of Mps.
Mps: underwriting syndicate banks worried
On the other hand, the CEO of MPS has repeatedly reiterated the need for the negotiations relating to the capital increase remain separate from any revisions to trade agreements that link Mps with the Anima asset management group and with the AXA insurance company.
However, in times of war, in the face of volatile markets, caught between the fear of a recession and that of inflation which remains stubbornly high, Mps is in a certainly unenviable position: it is looking for fresh vehicles and therefore for potential investors with a market value of just 300 million euros, and history is definitely not on his side, as it has burned € 25 billion of investor money since the global financial crisis.
Reuters thus reports that some banks in the underwriting syndicate for the capital increase they would be losing patience with Lovagliowhich remains reluctant to make commitments with AXA and Anima.
On the other hand, in the absence of private investors ready to participate in the recapitalization, it would be precisely these banks that would have to take on any unsold shares.
Reuters believes Anima could help MPS raise new capital with a maximum figure of 250 million, including an immediate payment linked to the possible improvement of commercial agreements with Mps.
The news agency points out among other things that the underwriting syndicate headed by Bank of America, Citigroup, Credit Suisse and Mediobanca he could also decide to leave Lovaglio and the bank in the lurch, just in case did not reveal a sufficient interest of private investors to participate in the capital increase.
And the premises are not at all comforting, given that a source close to the consortium confirmed that so far the banks have not been able to obtain not even a real commitment from potential investors.
Mps, Lovaglio and that sentence: ‘out there is a queue’. But no
Other than that sentence that the CEO Lovaglio uttered months ago, saying, referring to the capital increase operation, that “There was a queue outside”. In reality, the number one of Mps had referred to the queue between the “banks that wanted to support us (to participate in the underwriting syndicate) “.
Then there is the problem of tight deadlines, indeed very tight, given that after November the Italian rules that allow employees to retire at a lower age than the retirement age expire up to 7 years.
Lovaglio himself had spoken a few days ago of burning times for the launch of the 2.5 billion capital increase.
“More than a third of the capital increase of 2.5 billion by Banca Mps is used for voluntary staff redundancies “, said the CEO, pointing to the urgency of the recapitalization of Mps, after the green light of the extraordinary shareholders’ meeting.
CEO Luigi Lovaglio wants to act quickly, even in spite of a certain policy that would like to wait for the formation of the next government, before the capital increase. Just think of the statements that were recently released by the Maurizio Leo, economic advisor of Giorgia Meloni, in relation to the capital increase operation.
“The law expires on November 30th – Lovaglio warned – we made an important agreement with the trade unions that led us to implement this initiative in a definitive and clear way. We found considerable support from trade unions and all together we have set up the initiative that provides that we must finance this exodus, which concerns more than 3 thousand resources, in the face of a law that expires in November, so times are necessarily burning, we need funds to finance it ”.
An article by de The Corriere della Sera, confirming the first informal contacts that yesterday the CEO of Mps would have had with Axa e Anima Holdings, in an attempt to secure the subscription – up to a maximum of approx 400 million of the capital increase by a series of key investors, crucial according to Siena to have a stable shareholder base – before the start of the operation “.
The Courier writes that the figure “it could round up to around 500 million if the entrepreneur Denis Dumont, the asset manager Tosca fund and Algebris (the latter, however, at the window) join immediately. But if the Corriere speaks of these subjects in reference to the “interest shown”, as previously mentioned, in mentioning the name of Dumont, Reuters has indicated instead that some investors they would like to await the outcome of the political elections.
Mps, Axa and Anima: the analysts’ comment
Intesa SanPaolo analysts comment on the AXA Anima case by starting the note with the question “What’s up?”. “Yesterday – reads today’s note – Bloomberg reported that the CEO of Banca Monte dei Paschi di Siena, Luigi Lovaglio, is in preliminary talks with Axa and Anima Holding, as part of a plan aimed at securing up to 400 million euros from some investors, in view of the capital increase of the bank. According to the same source, Anima would like to take part in the capital increase operation with a contribution of up to 200 million euros, provided that Monte Paschi extends and strengthens its current partnership (which expires in 2030), while it is not yet clear how Axa would participate. According to Bloomberg, in 2021 Anima had 70 million euros in commissions through its partnership with Mps ”.
Intesa SanPaolo analysts underline that, in their opinion, “Anima is a strong cash generator, a factor that gives the company flexibility to the company to seize potential opportunities for its core business, through extraordinary transactions. On several occasions, the leaders have shown their interest and openness to discuss with their strategic partners, on further ways to strengthen their business relationships ”.
In early September the ECB has given the green light to the recapitalization of the Sienese institute, 64% owned by the Treasury.
They were then the same banks of the underwriting syndicate to manifest the desire to postpone the operation even to 2023.
In a note dedicated to MPS, IG recently wrote:
“Some investors point out that the operation is expected to be completed by the end of the year so as not to undermine the bank’s strategies that provide for numerous layoffs (which will generate one-off charges of € 800 million only in 2022 and savings of € 270 million in 2023) without taking into account the regulatory effects on the capital of the Sienese institute which will have direct effect from next year “.
But Mps CEO Luigi Lovaglio would be determined to go straight down the street. So much so that the Corriere stresses that “The recapitalization (of MPS) could be launched on Monday 10 October, although some sources hypothesize the previous Monday, October 3 ”.
Always that the banks of the consortium, it can be said, are able to detect an interestby private investors, which for now seems not to have been received.