LONDON Italy's Banca Generali (BGN.MI) is working with Goldman Sachs (GS.N) in negotiations to buy UniCredit's (CRDI.MI) controlling stake in online broker and bank FinecoBank (FBK.MI), but the parties remain far apart on price due to its holdings of UniCredit bonds, two sources close to the matter said on Wednesday.
The bank, which is majority-owned by insurer Assicurazioni Generali (GASI.MI), has approached UniCredit to acquire the business, which has more than 1 million clients and almost 26 billion euros ($29 billion) of assets under management, the sources said.
Unicredit owns 55.4 percent of FinecoBank, after its newly-appointed French boss Jean-Pierre Mustier sold a 10 percent holding via a share placing on his first day in the job on July 11.
If successful, the sale would value the whole business at more than 3 billion euros with UniCredit wanting an all-cash deal, the sources said.
Assicurazioni Generali, Banca Generali, FinecoBank and UniCredit all declined to comment. A spokesman for Goldman Sachs was not immediately available for comment.
UniCredit is conducting a wide-ranging review of its global network and has hired banks to run the parallel sales of its fund management arm Pioneer and Polish lender Bank Pekao PEO.WA, of which UniCredit holds a 40.1 percent stake.
Mustier, a former head of investment banking at Societe Generale and UniCredit who later became a partner at fund manager Tikehau Capital, is currently trying to sell Pioneer as a priority. He has not yet decided whether to keep FinecoBank but takes an opportunistic approach to asset disposals, the sources said.
A sale of FinecoBank, which has a market value of 3.1 billion euros, would help UniCredit strengthen its capital buffers and reduce the need for a share issue.
Mustier is expected to unveil a strategic and capital-boosting plan at the end of November and wants to have a clear idea of how much he is likely to raise from asset sales before pressing ahead with a share offer.
Generali, which ranks as Italy's largest asset manager, has set its sights on both Pioneer and FinecoBank, the sources said.
But while it is one of the main contenders for Pioneer alongside French group Amundi (AMUN.PA) and an Italian consortium led by Poste Italiane PST.mi, it has yet to persuade UniCredit to part with FinecoBank.
Discussions are currently focused on Fineco's valuation due to the high amount of UniCredit bonds it holds, one of the sources said.
According to ICBPI analysts, FinecoBank holds 12 billion euros of UniCredit bonds and around 3 billion euros of other UniCredit debt, together accounting for 80 percent of its total assets.
FinecoBank has so far benefited from a favorable accounting and regulatory treatment of its UniCredit bond holdings since the business is controlled by UniCredit, one of the sources said.
Should its owner change that treatment could cease, he said.
So far Generali has offered an all-share deal in a bid to overcome price differences but UniCredit wants cash. "This could be a slow-moving process. UniCredit wants a cash transaction and this is proving a major hurdle," the source said.
He added that UniCredit is in no rush to sell FinecoBank despite pressures to plug the gap in its capital requirements which is estimated to be as big as 8 billion euros.
UniCredit emerged as one of the worst performers in the industry wide stress tests conducted by European banking regulators in July.
($1 = 0.8965 euros)
(Additional reporting by Maria Pia Quaglia Regondi and Paola Arosio in Milan; Editing by Greg Mahlich)