Consob to Rule on SAI-La Fondiaria Merger by End of this Month

December 3, 2002

Consob, the Commission charged with regulating Italy’s stock markets, has indicated that it will rule on the validity of the merger between SAI and La Fondiaria before the end of this month. Its decision may bring an end to the long running dispute, which began a year ago, and has gone on longer than most Italian operas.

At issue is whether the powerful Mediobanca Group and SAI effectively controlled more than 30 percent of La Fondiaria’s shares when SAI made a bid for the company in a move aimed at creating Italy’s third largest insurance group.

Consob originally ruled that the two were acting in concert as they held an approximate 40 percent share in La Fondiaria, and were thus required under Italian law to make an equal tender offer to all of the company’s shareholders. SAI then worked out a deal with J.P. Morgan Chase and other investors to acquire a 19 percent interest in La Fondiaria, and Consob subsequently ruled in May that SAI and Mediobanca no longer had more than 30 percent control, clearing the way for the merger.

However, the deal with Morgan involved a Call/Put option which gave SAI’s controlling shareholder, Premafin SpA, the right to reacquire the shares, which is just what it did after the merger was approved by La Fondiaria’s shareholders, including the Morgan Group.

In October an Italian Court, in a case brought by the Liverpool Fund, a Bermuda-based hedge fund that owns around one percent of La Fondiaria’s shares, determined that Mediobanca and SAI had in fact acted in concert, and forced Consob to reopen the case. Whether any ruling it now makes will definitively end the matter is an open question

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