Italy Budget Committee Keeps Sweetener Key to Paschi Sale

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Italy’s budget commission won’t accept a proposal by some lawmakers to cap a sweetener for large M&A deals, removing a key hurdle to the sale of struggling lenderMonte dei Paschi di Siena SpA toUniCredit SpA.

The commission refused a request by some lawmakers within Prime Minister Giuseppe Conte’s governing coalition to limit a tax break in the draft budget, but it approved Sunday a slight amendment to the norm, which will require the Treasury to report to parliament before any sale of the stake it owns in the Tuscan bank.

The decision tokeep the tax relief in next year’s budget law was reported by Bloomberg News Saturday and comes amid a push by Italy’s Finance Ministry to strike a deal for the sale of the lender as soon as early 2021.

The tax relief is a key component in a package of incentives for potential Paschi buyers and could be worth as much as 3 billion euros ($3.7 billion), according to people familiar with the matter.

Other incentives currently under study include the spinoff of about 10 billion euros of the Siena-based lender’s legal risks to a state-owned entity, the people said.

UniCredit has insisted its board will “never agree” to any transaction that would harm the interests of the bank and its capital position, even after the resignation of Chief Executive Officer Jean Pierre Mustier, who had opposed any domestic acquisitions. Mustier had earlier made clear to the Treasury that any Paschi deal could be eventually be carried out only if it was “capital neutral” for the bank.

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