Generali to Sell BSI Unit to BTG Pactual for $1.7 Billion

By | July 14, 2014

Assicurazioni Generali SpA agreed to sell its Swiss private-banking unit BSI Group to Grupo BTG Pactual for CHF1.5 billion ($1.7 billion) as Italy’s biggest insurer seeks to boost capital.

Generali will receive CHF1.2 billion [$1.3466 billion] in cash and CHF300 million [$336.68 million] in BTG units listed in Sao Paulo, Generali said in a stock-exchange statement today.

The Trieste, Italy-based company will book about a €100 million ($136 million) loss, while the transaction will add about 9 percentage points to its Solvency 1 ratio, according to the statement.

Chief Executive Officer Mario Greco sold the unit to focus on the company’s main business, strengthen finances and boost profitability. The company, which set a goal of €4 billion [$5.449 billion] of revenue from asset sales by 2015, will have €3.7 billion ($5.04 billion] with this sale, Greco said in the statement.

“This sale completes the disposal process aimed at strengthening the capital base of the group, resolving a key issue for us, and allowing Generali to focus on driving forward with its core insurance business,” Greco said. “This result is a testament to our team’s ability and commitment to execute a complex transaction in a challenging environment.”

Generali rose as much as 1.4 percent and was up 0.7 percent to €15.49 [$21.10] as of 11:20 a.m. in Milan, giving the insurer a value of €24.1 billion [$32.83 billion].

U.S. Fines
BTG, the Brazilian lender controlled by billionaire Andre Esteves, is expanding internationally as Brazil’s growth slows. It’s added units in Mexico and Colombia, and in January Esteves said he plans to open offices in Geneva, Houston and Singapore as the firm expands in commodities.

Proceeds from the sale, which is scheduled to be completed by the first half of 2015, may be reduced by “any fine established pursuant to the U.S. Department of Justice’s tax amnesty program relating to Swiss financial banking institutions payable by BSI,” Generali said.

BSI is one of at least 36 Category 2 Swiss banks seeking to avoid prosecution for handling undeclared American money by joining the U.S. Justice Department’s voluntary disclosure program. The U.S. is scouring Switzerland for names of tax dodgers who used the world’s largest offshore haven to hide money from the Internal Revenue Service.

BSI Loss
Under a program announced in August, about a third of Swiss banks with “reason to believe” they violated tax laws asked the Justice Department to forgo prosecution. In turn, banks must hand over data on undeclared accounts and pay penalties.

BSI had a net loss of CHF722 million [$810.5 million] last year as it took write downs faster than planned because of new regulations for accounting treatment of goodwill, the bank said April 28.

Generali’s net income in the three months to March climbed to €660 million [$899 million] from €603 million [$821 million] a year earlier, the company said in May. The first-quarter pro-forma Solvency 1 ratio after the BSI sale will exceed the insurer’s 2015 target of 160 percent, it said today.

“Once the announced sale of BSI is concluded, Generali’s period of balance sheet repair will be complete,” Marcus Rivaldi, an analyst at Morgan Stanley, said in a note today. “Focus now turns to how earnings and dividends can be improved.”

–With assistance from Francesca Cinelli in Milan.

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