UniCredit puts Pioneer deal with Santander on hold before CEO change - sources

UniCredit's hunt for a new CEO has delayed the Italian bank's deal with Santander further, following the resignation of Federico Ghizzoni. UniCredit announced a deal to merge fund management business, Pioneer, with Santander's counterpart in April 2015; however, the sale has been frozen while UniCredit waits for new management to review the deal. While the completion of the deal would create one of Europe's leading asset gatherers and give Pioneer an enterprise value of €2.75bn, there is a high chance the deal could be called off completely as alternative buyers are expected to be considered by the new management.

UniCredit and Santander announced an agreement in April last year to merge Pioneer with Santander Asset management, six months after saying they were in talks to combine the two businesses.

But the deal stalled over regulatory and governance hurdles and is now likely to be ditched altogether given the imminent departure of UniCredit's CEO Federico Ghizzoni, who is expected to resign at a board meeting on Tuesday, two sources said.

"The sale is currently frozen. (UniCredit's) new management will review the deal," said one of the sources.

"There is a high chance the Santander deal will be called off," the source said, adding there was a "queue" of alternative buyers for Pioneer.

Confirmation that the accord is being called off could add to pressure on Italy's biggest bank by assets to launch a rights issue, with analysts saying it would need to raise between 5 billion euros (4 billion pounds) and 10 billion euros to bolster its finances.

The deal with Santander would create one of Europe's leading asset gatherers with 400 billion euros ($446 billion) under management.

It would give Pioneer an enterprise value of 2.75 billion euros and could add 25 basis points to UniCredit's core capital base, which is stretched and lags behind peers.

One of the sources said Pioneer would eventually be sold, but UniCredit needed to find a better buyer "to help maximize Pioneer's value and extract distribution and cost synergies."

UniCredit is reviewing the sale of other assets, including stakes in online broker Fineco, Poland's Bank Pekao and Turkey's Yapi Kredi, a source said last week.

However, any disposals would have to be decided by the new chief executive, prompting another source to say "all strategic operations are being put on ice."

Ghizzoni, who earlier this month said he hoped to close the deal with Santander by the end of the year, said on Monday the two sides were still working on the merger.

"Unfortunately there are no new developments, but we should have news soon, within a few weeks. We are still waiting for the response of regulators to see whether the transaction can be done or not," he said.

A UniCredit spokesman declined to comment further. Santander declined to comment.

Among candidates tipped to replace Ghizzoni are Jean-Pierre Mustier, a former Societe Generale and UniCredit executive, UBS's investment banking boss, Andrea Orcel, and Merrill Lynch's Italy chief, Marco Morelli.

The head of Mediobanca, Alberto Nagel, has also been mentioned as a possible candidate but three sources said he did not appear to be interested in the job.

A decision on Ghizzoni's replacement is expected in the next couple of weeks, possibly by a June 9 board meeting.

(additional reporting by Gianluca Semeraro, writing by Silvia Aloisi; editing by Adrian Croft)

By Paola Arosio and Pamela Barbaglia