The Carige bank logo is seen in Rome, Italy April 9, 2016. REUTERS/Alessandro Bianchi/File Photo

MILAN, Jan 11 (Reuters) – Shares of Italian bank Carige (CRGI.MI) fell more than 10% on Tuesday after domestic rival BPER Banca (EMII.MI) won exclusive rights to discuss a acquisition of the distressed lender.

FITD, the Italian banking fund that has held Carige since a bailout in 2019, picked BPER on Monday over competing bids from Credit Agricole Italia (CAGR.PA) and US fund Cerberus, to broker a sale that it hopes will end a seven-year crisis at the Bank.

Carige stock had gained more than a third since mid-December following news of interest from BPER and Credit Agricole Italia, and was trading well above BPER’s takeover bid price. of 0.80 euros.

They fell 10.6% at the start of trading on Tuesday to 0.7996 euros, triggering an automatic suspension of trading.

BPER, Italy’s fifth-largest bank, was the favored bidder, with the country’s authorities keen for tie-ups between mid-tier lenders while some FITD members were wary of further expansion by Crédit Agricole Italia, the biggest foreign lender in the country.

Carige and its biggest rival Monte dei Paschi di Siena (BMPS.MI) are the two main banking headaches preventing Italy from completing a restructuring started in 2015 that has cost sound lenders more than 10 billion euros ( $11 billion) in rescue aid.

After failing to sell state-owned Monte dei Paschi to heavyweight UniCredit (CRDI.MI) last year, Italy tabled 380 million euros in gross tax incentives to facilitate the Carige divestment.

Following a meeting of its steering committee on Monday, the FITD fund, which owns 80% of Carige, indicated that BPER would have four weeks to study the financial data of the target in order to agree on a sale no later than February 15.

Italian banks spent 600 million euros to rescue Carige through the FITD fund, which now needs to pump more money into it to offload her.

Suitors BPER, Crédit Agricole Italia and Cerberus had all offered a token euro and demanded cash to cover restructuring and cleanup costs.

After initially requesting a €1 billion capital injection, which the FITD rejected as exceeding the €700 million it could spend, the BPER announced on Monday that it had reduced the request to €530 million. euros.

Thanks to the tax incentives, BPER said it still expects the deal to have a neutral impact on its capital reserves and significantly increase earnings per share from 2023.

BPER would then buy out the remaining investors in Carige at 0.80 euro per share.

Shares of BPER rose 1.5% on Tuesday.

“The terms of the deal are somewhat less attractive than originally presented,” Citi analysts said. “But we believe the deal still represents an opportunity for BPER.”

“This potential deal is a further step in Italian banking consolidation and the removal of one of the key overhangs in the sector.”

Citi said BPER would focus on cutting costs at Carige, which was eating up 93% of its revenue as of Sept. 30.

Last year, the Italian branch of France’s Credit Agricole bought Creval for 1 billion euros and in 2017 reached a rescue deal with FITD for three failed banks.

BPER was launched on the path to expansion by its reference shareholder, the insurer UnipolSAI (US.MI), and last year increased its assets by 40% by buying branches sold as part of the takeover of ‘UBI by Intesa Sanpaolo (ISP.MI).

Carige would further increase BPER’s assets to around €155bn, making it Italy’s 4th largest bank and a more direct competitor to Banco BPM (BAMI.MI), No. 3 and a possible long-time merger partner before the latest collapse of the talks. year.

Analysts said the Carige deal further reduced the already slim chance of a BPER-Banco BPM merger, while BPER remained a candidate to take over smaller counterpart Popolare di Sondrio, of which UnipolSAI is also a major shareholder.

BPER worked with Rothschild, while KMPG and Deutsche Bank advised FITD.

(This story was filed to add the name of the Italian bank fund to paragraph 2)

Editing by David Goodman and Susan Fenton

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