* Italy rushes to find a bailed out MPS buyer
* The CEO of UniCredit will step down in April
* UniCredit is considered by Rome to be the ideal buyer for MPS
LONDON / MILAN, December 2 (Reuters) – The sudden resignation of Jean Pierre Mustier as chief executive of UniCredit complicates efforts by the Italian Ministry of Finance to prop up Monte dei Paschi (MPS), bringing merger negotiations to a halt and possible delays.
The Treasury is looking to find a solution to long-term problems at MPS by the end of January, one source told Reuters, and UniCredit’s strong balance sheet has led Rome to identify it as the best option to take over the loss-making bank. .
The Italian government had discussed the terms of a possible deal with Mustier, people with knowledge of the matter, before the French banker suddenly stepped out – a decision he said was made because the board no longer supported his plans.
Mustier, who opposes the merger and prefers to return cash to investors in a bid to raise UniCredit’s share price, is open to considering a deal that has almost no impact on the bank’s capital ratio, two people added.
Agreeing to a deal has now become more complicated as Mustier plans to step down in April or as soon as a successor is found.
Investors divested UniCredit shares following Mustier’s decision due to uncertainty over strategy at Italy’s No.2 bank and concerns that a takeover of MPS, of which Rome owns 68% of the stake after a bailout in 2017, is more likely.
In an effort to reassure investors, the UniCredit board said on Tuesday that they would never approve a deal that hurts the bank’s capital position.
MPS expects to breach the minimum capital threshold in the first quarter due to the cost of clearing bad debts recently settled and the provisions against legal risk.
Meanwhile, the bank’s pending lawsuits remain a major hurdle to a deal, said people involved in the process.
The director of UniCredit is concerned that it will worsen his risk profile by taking MPS, said three people familiar with the board’s thinking.
A focus of concern is the push by the co-ruling 5-Star Movement to limit tax advantages that the government plans to introduce to facilitate the merger.
In an effort to minimize disruption, UniCredit board and elected Chairman Pier Carlo Padoan, the former Italian economy minister who negotiated the MPS bailout with the EU, are looking for a new CEO with headhunter Spencer Stuart.
Relations between Mustier and the board of directors have deteriorated in recent months, insiders say, and speculation about a possible exit has swirled since he turned down the top job at HSBC earlier this year. (Additional reporting by Gianluca Semeraro and Andrea Mandala in Milan, Stefano Bernabei in Rome; written by Valentina Za; Editing by Alexander Smith)