Italian Court Rejects Fondiaria Challenge to Shareholder Vote

May 10, 2002

A court in Florence has rejected the challenge of La Fondiaria to the voting rights of a group of shareholders led by J.P. Morgan Chase, ruling that they should be allowed to vote their 29 percent stake in the company at the annual general meeting, now scheduled for May 30.

At stake are the hostile merger plans of SAI, another Italian insurer, which wants to take over la Fondiaria (See IJ Website April, 30 and March 18). The company’s management claims that the Morgan group’s acquisition of the shares, after Italian regulators ruled that SAI had to make an offer to all shareholders, is part of a plan to avoid the prior ruling. Morgan and SAI have issued reciprocal call/put options which give SAI the right to reacquire the shares.

It’s assumed that, if they were allowed to vote at the meeting, they would seek to install management more favorable to the SAI merger, and hence la Fondiaria has been seeking to block the Morgan group from voting.

Yet to rule on the same challenge is Consob, the agency that regulates Italy’s banks and financial markets. If it finds that the Morgan group is working in concert with SAI, it could expand its previous order that all shareholders must be included in any merger offer, making it considerably more expensive.

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