SAI, La Fondiaria Merger Moves Closer, Full Bid Not Necessary

May 20, 2002

Italian insurer SAI’s year-long battle to merge with La Fondiaria may be moving towards a successful conclusion, as Consob, the Italian stock market regulator, ruled that the 29 percent stake controlled by J.P. Morgan Chase was an independent holding.

The ruling came a week after a court in Florence ruled that the Morgan group could voted their shares at the next meeting of La Fondiaria shareholders, which is now scheduled for May 30. (See IJ Website May 10)

La Fondiaria management has been resisting SAI’s attempt to take over the company. It won several rulings last summer, which prevented SAI from acquiring the 22 percent stake owned by Montedison and a ruling by Consob that the combined 29 percent share had to be counted along with the stake in the La Fondiaria owned by the Italian financial conglomerate Mediobanca. As the total was more than 30 percent of the company’s ownership, Consob ruled that a full bid must be made on the same terms to all shareholders, making the deal too expensive.

SAI then sold then sold its 6.75 percent stake in La Fondiaria to the Morgan Group, which had also acquired and exercised the option SAI held to buy the 22 percent stake of Montedison. Following this series of transactions the two groups executed reciprocal call/put options thorough which SAI could reacquire the shares.

La Fondiaria challenged the arrangement as a sham, maintaining that SAI and Mediobanca in fact still controlled more than 30 percent of the La Fondiaria’s shares, but this contention has now been rejected both by the court and Consob.

According to a report from Dow Jones Newswire, which appeared before Consob made its ruling, SAI and La Fondiaria management have apparently been holding talks in the hopes of reaching an amicable agreement to merge the two companies. The report said that progress had been made. If the merger finally happens it would create Italy’s second largest p/c insurer after Generali.

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