UPDATE 3-Nexi, SIA near deal to create Italian payments powerhouse - sources

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LONDON/MILAN, Sept 16 (Reuters) - Italian payments firm Nexi and smaller rival SIA are working flat out to resolve final differences over governance as they aim to seal a merger deal in the coming weeks, sources familiar with the matter told Reuters.

The two companies have reached a broad accord on valuation and Nexi’s boss Paolo Bertoluzzo will lead the combined entity as its chief executive, three sources said.

The deal could be announced by the end of September, after the companies failed to reach an agreement earlier this month due to prolonged discussions over corporate governance structure of the merged entity, two of the sources said.

“We’re almost there. The goal was to have it ready by the start of September, but there are a few more things to iron out,” one of the sources said.

Nexi shares were up 3.56% at 1415 GMT after Reuters first reported that a deal with SIA is expected soon.

Nexi and SIA declined to comment.

The two companies have been haggling for months over the terms of a key contract between state-backed SIA and Italian lender UniCredit which is in the process of being renegotiated, the sources said.

Nexi has expressed concern over a series of upfront payments that SIA is due to make to UniCredit as part of their new agreement, two of the sources said, adding that these payments should not weigh on the new merged entity.

But a compromise solution is in the works, they said.

SIA’s relationship with UniCredit has been a major hurdle during negotiations with Nexi.

An existing contract with the Italian bank was making it hard to establish SIA’s valuation due to the possibility that UniCredit could terminate their agreement after 2021, sources have said.

Yet SIA and UniCredit are set to sign a new accord soon and extend the terms of their contract to 2036, a fourth source said.

SIA is controlled by Italian state lender Cassa Depositi e Prestiti (CDP) through investment vehicle FSIA Investimenti, which owns a 57.42% stake.

CDP also owns 25.69% of SIA via its holding company CDP Equity, which gives the state lender an overall exposure of slightly more than 83%.

CDP is set to retain a large stake in the merged entity, the sources said.

The deal comes as European payments providers are seeking to bulk up to create global champions.

France’s Worldline agreed to take on French peer Ingenico in February in a 7.8 billion euro deal that will create the fourth-biggest payments company in the world. (Reporting by Pamela Barbaglia in London and Elisa Anzolin and Valentina Za in Milan; Additional reporting by Stefano Bernabei in Rome and Andrea Mandala in Milan; Editing by Jan Harvey and David Evans)