Monte Paschi and Telecom Italia will be the most pressing problems for the winners of the elections
Italy’s next government may have a hard time untangling some vexing corporate knots. Giorgia Meloni (Brothers of Italy) and her allies are protectionists.
Mario Draghi failed to solve some of the main business headaches. Monte Paschi is the most immediate. State owned by 64%, it is only worth 300 million five years after Rome injected 5.4 billion. Attempts to sell it to Unicredit failed in 2021, after Andrea Orcel demanded a state injection of 6,000 million. The Tuscan bank is trying to raise 2,500 million to pay for layoffs and reduce costs (they are 70% of income).
Even if it succeeds, it will still lack scale and will need a buyer. UniCredit is unlikely to return. And foreign bidders may not be welcome under Meloni’s patriotic government. That leaves a $4bn merger with BPM as the most likely outcome. But it is less profitable and has a more unstable balance sheet than UniCredit, which is likely to result in a weaker bank.
Draghi also failed to sell Telecom Italia’s 4 billion fixed-line network, which is 10% owned by the state fund CDP. His stock, which has fallen 55% this year, sank after KKR abandoned a $10.8bn buyout, and rising rates aggravated his debt problem. He wants to sell control of his landline network to CDP, a plan that Meloni supports. But it could be expensive for taxpayers. Vivendi, the main investor, asks 31,000 million for the asset, although analysts value it at 20,000 million in the best of cases.
Even if the sale of the network goes through, the services branch will still have some 20,000 employees in a very stressed market. But firing can be difficult under a protectionist government. In addition, foreign bidders are more likely to stay on the sidelines, limiting potential gains for weary TIM investors.
Meloni is likely to find pachuco Italian companies a tough nut to crack.
