The battle for control of Italian insurer Fondiaria-SAI heated up on Wednesday when two private equity funds tabled a rival offer to one brokered by top investment bank Mediobanca to rescue the troubled insurer by merging it with peer Unipol.
At the end of January, Mediobanca got Bologna-based Unipol to agree to rescue the money-losing Fondiaria in a four-way merger deal that would create a national insurance group.
But the plan, based on three capital increases of more than €2 billion ($2.664 billion), was waylaid earlier this month when private equity fund Palladio Finanziaria and Sator, the investment vehicle of banker Matteo Arpe, bought an 8 percent stake in Fondiaria.
In a joint statement late on Wednesday, the two funds spelled out their intentions by saying they were ready to pump up to €450 million [$600 million] into Fondiaria’s parent company Premafin to help shore up its depleted capital base and support a cash call at Fondiaria.
Unlike the plan of Mediobanca, the funds’ offer does not envisage any merger of Premafin with Fondiaria.
The offer, which expires on March 8, is subject to the funds ending up with no less than 60 percent of Premafin shares and on market regulator Consob waiving a mandatory bid on shares of Premafin, Fondiaria and unit Milano Assicurazioni.
Shares in Fondiaria have risen sharply since the end of January on speculation that Palladio and Sator might engineer a rival bid for the company or at least secure a better deal for investors than the existing one.
Palladio and Sator said their offer foresees the restructuring of debt at Premafin with creditor banks.
Mediobanca — a controlling shareholder in Italy’s biggest insurer Assicurazioni Generali and a bulwark of Italian capitalism — has more than €1 billion [$1.332 billion] of loan exposure to Fondiaria and Premafin.
Earlier on Wednesday a source close to the matter told Reuters that French insurer AXA is looking to snap up some of the assets that Unipol and Fondiaria could be asked to sell if their merger goes through.
“AXA has ruled out any ties with Palladio and Sator and has reiterated its interest in assets that Unipol and Fondiaria might have to sell for antitrust reasons,” the source said.
AXA’s CEO, Henri de Castries, paid a surprise visit to Mediobanca’s deal-making headquarters in Milan on Wednesday, minutes before the arrival of Salvatore Ligresti, the owner of Premafin.
Merging Fondiaria, which is Italy’s biggest motor insurer, with Unipol would create an insurance champion with a 32 percent share of non-life business and 37 percent of the motor sector.
“Going on previous merger deals we’ve seen in the sector, the antitrust (regulator) will ask the new group to shed non-life assets,” a source close to the deal said.
In December, when concerns about Italy’s sovereign debt problems were acute, Mediobanca sounded out a series of possible foreign suitors for Fondiaria, including AXA, another source said, adding none had expressed an interest.
Fondiaria is expected to post a loss of more than €1 billion for 2011, with a solvency ratio at an alarming 75 percent.
Fondiaria, which just five years ago had a market capitalization of €5 billion [$6.66 billion], has withered to about €710 million [$945.72 million] under the management of the Ligresti family.
On his way into the Mediobanca building, de Castries declined to comment on a possible interest in Fondiaria assets but confirmed the group was interested in growing in Italy.
Fondiaria shares, which have risen more than 150 percent since the deal with Unipol was announced at the end of January, ended up 4.7 percent at €1.69 [$2.25] on Wednesday, while the European insurance sector was down 1.1 percent.
(editing by John Wallace, Phil Berlowitz)