La Fondiaria Agrees to Merge with SAI

After a yearlong battle, Italian insurer La Fondiaria has given up trying to fend of SAI’s merger attempts and has essentially consented to be taken over by the rival Italian company (See IJ Website May 30).

While the combination of the two company’s will emerge as Italy’s largest p/c insurer, and second largest overall behind Generali, it’s not necessarily such a great deal for La Fondiaria’s shareholders.

SAI had originally offered €9.50 ($8.90) per share for the stake held by Montedison, but when that deal was blocked by Consob, the Italian stock market regulators on the basis that SAI would have had to make the same offer to all shareholders, it agreed to transfer its rights to buy the share to a group headed by J.P. Morgan Chase, which eventually ended up controlling 29 percent of la Fondiaria’s shares..

La Fondiaria and other minority shareholders challenged the transfer to Morgan, as being simply a way to avoid the Consob ruling, especially since SAI and Morgan agreed on a call/put arrangement giving SAI the right to reacquire the shares. The claim was rejected both by the regulators and Italian courts clearing the way for the merger.

La Fondiaria’s other shareholders, however, won’t be getting anywhere near € 9.50 a share. SAI is offering one of its share for every four La Fondiaria shares, which gives them a value at current market prices of around €4.46 ($4.18) less than half the value Morgan paid.

SAI chief Carlo Ciani will head the merged company, while La Fondiaria’s CEO, Roberto Gavazzi will become his deputy.