The “fat lady” may have sung in the ongoing merger battle between Italy’s La Fondiaria and SAI ( See IJ Website May, 30,31) but some members of the audience, notably the Bermuda-based Liverpool Mutual Fund, are distinctly unhappy with the tune.
Liverpool’s managers have long maintained that the supposed merger is actually a takeover by SAI in concert with its main shareholder Mediobanca and a group of investors headed by J.P. Morgan Chase. (See IJ Website May 23) It sought to prevent the Morgan group, which paid a hefty premium for its shares, from voting for the merger, which, if its formally approved, will pay minority shareholders about half as much.
According to a report from Dow Jones Newswire, having failed to prevent the merger, Liverpool is now committed to taking legal action for what it sees as “actions by directors against the interests of the company” [La Fondiaria]. The report noted that five of the nine board members that approved the deal also acted against the interest of the minority shareholders, and that it would possibly take action against them.”
Standard & Poor’s reacted to the merger agreement by announcing that it “has revised its CreditWatch implications on the single-‘A’-minus insurer financial strength ratings of La Fondiaria Assicurazioni and Milano Assicurazioni SpA — the core operating entities of the Italian composite insurance group La Fondiaria — to negative from developing, where they were placed on Nov. 23, 2001.”
S&P also noted that when the merger becomes final, “it is understood that SAI will have to exercise its call options to purchase the 29.9% stake in Fondiaria, now owned by a group of investors [the Morgan Group]. ISVAP, the Italian insurance regulator, will have to give its agreement with regard to both the merger and the exercise of the options.”
S&P credit analyst Laura Santori indicated that “in the absence of external funding — the exercise of the said call options will put the newly created group Fondiaria-SAI in a marginal capital position that is unlikely to support a secure rating.” S&P also expressed the opinion that there were some significant challenges ahead in integrating the two companies.
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