Fondiaria-Sai, the Italian insurer, has rebuffed an offer from two private equity funds and is moving forward with plans for a four-way merger that will create a company it says will be better able to take on market leader Generali.
Following a board meeting that began on Thursday afternoon and finished early on Friday morning, Fondiaria-Sai said that while it would continue “to look into the terms of the offer” from the two funds, Sator and Palladio, once an agreement on the merger is reached it would move forward with that plan.
Sator and Palladio, which together own 8 per cent of Fondiaria-Sai, have offered to pump as much as €400m of their own money into the insurance company as part of an €800m cash call. The funds, which have one representative on Fondiaria-Sai’s board, would end up owning a stake of between 35 per cent and 45 per cent in the insurance company.
Under the four-way merger, Unipol, Italy’s third-biggest insurer by assets, would take a controlling stake in Premafin, which owns 36 per cent of Fondiaria-Sai. Premafin, at this point controlled by Unipol, would then participate in a Fondiaria-Sai capital increase. Unipol and the newly capitalised Fondiaria-Sai would then merge with Premafin and a small Fondiaria-Sai subsidiary, Milano Assicurazioni.
The two funds had said they were trying to open a dialogue with Fondiaria-Sai and that their offer was non-binding, meaning the contested insurance company could continue to discuss the particulars of the four-way merger.
Those particulars are proving to be a sticking point, with the companies involved unable to reach an agreement on the percentages each party will own following the deal.
After the board meeting concluded, Fondiaria-Sai sent a letter to Premafin, Milano Assicurazioni and Unipol giving its proposal for the ownership structure of the new company following the merger. Fondiaria said it should have 27.45 per cent of the combined company. Unipol would get 61 per cent of the company, Milano Assicurazioni 10.7 per cent and Premafin 0.85 per cent.
With Premafin owning a controlling stake in Fondiaria-Sai and with the latter controlling Milan Assicurazioni, the number that has been the main sticking point is how much Unipol will have in the new group. Unipol said it had not yet formally received the Fondiaria-Sai offer and would decide what to do once it had.
Unipol has said publicly that it wants a 67 per cent stake in the merged entity, but people briefed on the matter have said it is willing to accept 61.8 per cent. That would indicate that the gap between what Fondiaria-Sai is offering and what Unipol wants is 0.8 percentage points.
To avoid further delays to the deal, a decision about the stakes must be decided by Tuesday, when Premafin has a shareholders’ meeting in which the company is expected to approve a cash call worth up to €400m reserved for Unipol.
The Fondiaria-Sai board member representing Palladio and Sator, which is run by former Capitalia chief Matteo Arpe, voted against the insurance company’s decision to rebuff the funds. The funds said they had not yet decided what their next move would be.
Amid widespread losses in early trading on European markets, Fondiaria-Sai dropped as much as 8.8 per cent to €0.97. Before Friday’s opening, the stock had risen 23 per cent since the two funds made their offer last week. Unipol was down 0.5 per cent at €19.07, while Premafin declined 4.7 per cent to €0.16.