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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is a former global head of equity capital markets at Bank of America and is now a managing director at Seda Experts
Sometimes a capital markets deal exposes the machinery of political power. The Italian government’s sale of Monte dei Paschi di Siena shares in November — which raised some €1.1bn — shows that while European governments want to trim their holdings in major banks, they are far less eager to give up control.
The Financial Times has reported that the European Commission is probing claims (firmly denied by the lead manager Banca Akros) that key institutional investors — among them UniCredit, BlackRock and Norway’s sovereign wealth fund Norges Bank Investment Management — were frozen out of the MPS offering. When they tried to place orders, they were allegedly informed that the books had already closed. Whatever the truth, the entirety of the shares were allocated to four Italian investors who, although not acting in concert, are reportedly associated with the government’s vision of building a “third pillar” in domestic banking alongside UniCredit and Intesa Sanpaolo.
Initially, the deal followed the usual procedure. Italy’s Ministry of Economics and Finance had invited banks to bid to sell a 7 per cent stake. I know of several banks that — sensing wider strategic interest — responded with aggressive proposals, offering to place the shares with discounts of less than 1 per cent to market, unusually tight for a deal of this size.
But the government appointed Banca Akros, a relatively small Italian bank subsidiary of Banco BPM, as sole bookrunner. That was the first surprise. Previous placements in MPS had involved multiple, often international, lead banks. Akros is not a bank that international investors I know have engaged with regularly. One major global fund manager told me that his institution was not set up to trade with Akros at the time.
The second surprise arose in the execution. Instead of distributing shares broadly across institutional investors, Akros placed the full offering with just four Italian groups: its parent Banco BPM, Anima Holding (then 22 per cent owned by BPM, now nearly 90 per cent), construction tycoon Francesco Gaetano Caltagirone, and Delfin, the holding company of the late Luxottica founder Leonardo Del Vecchio. The offering more than doubled in size, from 7 to 15 per cent, and priced at a 5 per cent premium to market. The stock jumped more than 12 per cent the next morning amid speculation of strategic interest, suggesting that while Rome secured an excellent price, some value may still have been left on the table.
I worked on hundreds of European equity offerings for more than 25 years, and deals like this follow a playbook. The lead banks notify the market via newswires of any upsizing, provide updated pricing guidance, allow investors time (usually at least 30 minutes) to amend their orders, and give advance warning that the order book will close. Any probe will have to determine whether these execution steps were followed and, if not, why.
UniCredit reportedly offered to buy 10 per cent of MPS — an anchor order that likely would have included a strategic premium. Unlike typical fund managers like BlackRock or NBIM, UniCredit’s reported interest, if it had been communicated to Banca Akros, could have shifted both the pricing dynamic and the strategic rationale of the transaction. Banca Akros strongly denies ever receiving such an order.
The outcome of the placing left a sharply narrowed investor base. In a typical deal, that would kill competitive tension and depress pricing. But this was not a typical deal. Pricing a block at a premium is rare; doing so without global investor support is rarer still.
Banca Akros says the placement was conducted properly and transparently, in compliance with the rules and practices governing such operations. Yet there is also something unsettling about a bookrunner allocating so many shares to its own parent. Governments typically use multiple independent lead banks in privatisations to avoid any perception of conflict of interest. Italy did not, even though it had done so on the two previous MPS share sales.
When European governments unload equity stakes in banks, they are not just trying to maximise sale proceeds. They are also managing financial stability, backing national champions and shaping strategic sectors, often overriding free market principles. The MPS deal smacks of industrial policy disguised as capital markets activity.
Italy got what it wanted: a premium sale price, aligned buyers and no unwelcome interlopers. But the way it did so shows that some privatisations are more private than others.
