Bermuda Fund May Challenge SAI, La Fondiaria Ruling

May 22, 2002

The Bermuda-based Liverpool Fund, which owns a one percent stake in Italian insurer La Fondiaria, is reportedly considering taking legal action to block the decision by Consob, the Italian stock market regulator, that SAI, another Italian insurer, is not required to make a bid for all of the company’s shares. (See IJ Website May 20).

According to a report from Dow Jones Newswire Liverpool’s managers see no practical difference in ownership of a 29 percent stake in La Fondiaria by a group headed by J.P. Morgan Chase, and the combined ownership of 13.8 percent by Italian financial conglomerate Mediobanca.

The two stakes together are more than 30 percent, and under Italian financial regulations an owner of more than a 30 percent stake, who is seeking to acquire majority control, must make an offer on equal terms to all shareholders. The Morgan group paid around $9 for its stake, while La Fondiaria shares have been selling in the $5-6 range.

Liverpool claims that minority shareholders’ right are not being protected. It may have a good point, as the Morgan Group and SAI have executed reciprocal call/put options on the shares, which give SAI the right to acquire them.

The Consob ruling, however, found that there was enough separation between the Morgan group and SAI to consider the 29 percent stake as independent, and therefore no offer needed to be made to minority shareholders.

As Yogi Berra once quipped about opera – which is quintessentially Italian – “It ain’t over ’til the fat lady sings.”|”bermuda, fund, may, challenge, sai,, la, fondiaria, ruling

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