MILAN (Reuters) - Banco Bpm is the best stock on the Ftse Mib up about 2 percent after an agreement signed on Friday to sell 71.6 percent of its e-money business to private equity fund Fsi and Bcc Iccrea Group for up to 600 million euros in cash and shares.

The Pay Holding joint venture, says a note, will be the second-largest national operator in the digital payments sector with a market share of more than 10 percent, with about 9 million cards, 400,000 Pos and about 110 billion euros in intermediated transactions. It will be owned about 43 percent by Fsi and about 28.6 percent each by Banco Bpm and Iccrea Banca. Pay Holding already controls Bcc Pay.

Banco Bpm will receive for the contributed assets an immediate consideration of €500 million (of which about €200 million will be in cash and the rest in Pay Holding shares), to which deferred price components of up to €100 million will be added, which could bring the total value to €600 million.

Upon closing, expected by the first quarter of 2024, the transaction will have a positive impact on Banco's fully loaded Cet1 ratio of about 32 basis points, which with any price additions could rise to about 50 points.

Overall, the transaction will generate an enhancement benefit for Banco Bpm of more than 2 billion euros in terms of Npv over the time horizon of the agreement, the note says.

The transaction values the new JV at about 15 times Ebitda, sources close to the deal said. This is almost double the valuation multiple at which market leader Nexi is currently traded.Also vying for the strategic partnership were Nexi, which was already a partner of Banco Bpm, and Worldline, or the two leading European payment companies.

Banco Bpm's e-money was the last major industry asset left in the market in Italy, and this, according to some bankers, prompted Fsi to beat rivals to gain scale in a rapidly growing field.

Nexi, the national champion, handles €181.5 billion in merchant transactions, including €102 billion in Italy, and €204.2 billion in card transactions, including €116.8 billion in Italy.

Migrating Banco's current customers to the new partner will take several years, however, with the risk of losing customers to Nexi and others, analysts highlight.

Around 10.30 a.m. Banco rises 2.13 percent in a flat market.

"With a Cet1 already geared toward the targets of the old business plan, this payment agreement paves the way for a buyback in 2024 that could reach up to €500 million" (7.5 percent of market capitalization), writes JP Morgan, which on the other hand recalls how the stock has already done better than the sector since announcing its quarterly report and made the first mention of a possible buyback. JP Morgan covers the stock with 'neutral'.

The deal guarantees that Banco will preserve the commission component generated by monetics (140 million net revenues to 2022) and possibly benefit from the increase in profits expected from the jv, Equita points out ('buy' on the stock), which adds, "The execution/migration risk linked to the change of technology partner will remain to be assessed."

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(English version Claudia Cristoferi, editing Sabina Suzzi)