Intesa Sanpaolo Bank Confirms It Is Eyeing a Merger with Generali

By | January 25, 2017

Intesa Sanpaolo SpA said it’s considering a merger with Assicurazioni Generali SpA, a deal that would reshape Italy’s financial industry by combining its second-biggest bank and largest insurer.

“Possible industrial combinations with Assicurazioni Generali are currently being examined by the bank’s management,” Intesa said in a statement late Tuesday. “The bank is interested in industrial growth in the areas of asset management, private banking and insurance in synergy with its banking networks, including through possible international partnerships.”

Intesa broke its silence after three days of reports in the Italian press said the bank was preparing a deal, possibly a joint breakup of Generali in partnership with Germany’s Allianz SE. While Generali’s stock surged, Intesa’s slumped amid skepticism from analysts and investors about the merits of a merger. Generali has a market value of about 24 billion euros ($25.8 billion), more than half of Intesa’s own capitalization.

Generali and Allianz declined to comment on the reports before Intesa issued its statement.

“Though we will keep an open mind, this rumored merger seems inconsistent with the company’s previously announced strategic plans,” David Herro, the Chicago-based chief investment officer at Harris Associates, said before Intesa’s statement. He said his company owns about 2.8 percent of the bank.

Regulator Talks

Consob, the Italian stock market regulator, is gathering executives from Intesa and Generali on Wednesday and Thursday, people familiar with the matter said before Intesa’s statement. Executives from UniCredit SpA, Italy’s largest bank, were summoned amid reports their firm may be involved, the people said.

Intesa is being advised by UBS Group AG on a possible deal with Generali and may appoint at least one other bank such as Goldman Sachs Group Inc., newspaper il Messaggero reported on Wednesday.

The deal may be a politically driven initiative to create an Italian financial champion to fend off a foreign predator for Generali, according to Fabrizio Spagna, managing director at Axia Financial Research in Padua, Italy. French insurance giant Axa SA has also been mentioned in the Italian press as an interested party.

“It’s hard to justify such a deal on an industrial perspective, considering it will add complexity and may erode capital,” Spagna said by phone.

A spokesman for Generali declined to comment on Intesa’s statement when reached by Bloomberg.

Shares Move

Intesa shares slid the most in more than a month Tuesday as analysts said a Generali deal would be complex and face antitrust issues. Generali, whose stock jumped 8.2 percent in Milan, had purchased 3 percent of Intesa on Monday. That defensive measure would prevent the bank from accumulating voting rights in the insurer without making a cash bid for control.

Generali has 76,000 employees and operates in more than 60 countries. Like other European insurers, it’s struggling to boost profitability as investment returns fall and competition increases. Philippe Donnet, who became chief executive officer in March, is cutting costs and focusing on cash generation and the retail business to improve returns.

Since Donnet took over, investment chief Nikhil Srinivasan has left the company and will be replaced by Tim Ryan. Generali may name head of corporate finance Luigi Lubelli as chief financial officer, replacing Alberto Minali, Messaggero reported.

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