(Reuters) – Italy's largest insurer Assicurazioni Generali on Monday said it would launch a € 1.17 billion ($ 1.4 billion) offer for minor rival Cattolica to further strengthen its domestic market leader.
The Italian insurance company was expected to go through a consolidation process in the country's financial industry where Intesa Sanpaolo took over rival lender UBI last year to build a banking and insurance giant.
In another surprise, last week Italy's second largest insurer, UnipolSAI, which is working to expand its distribution network, increased its stake in the small bank Popolare di Sondrio.
Generali had first moved to Cattolica last year and came to its rescue with an investment of € 300 million ($ 366 million) after regulators told the Verona-based insurance company to strengthen its
By buying a stake of almost 24 %, Generali became the single largest investor in Cattolica and moved Warren Buffett's Berkshire Hathaway to second place, excluding a 1
To gain full control, with the goal of taking Cattolica privately, Generali is offering € 6.75 per share, equivalent to a 15.3% premium to Cattolica's closing price on Friday.
Cattolica's shares rose 15% on Friday after presenting better-than-expected results. They had jumped more than 5% earlier in the week on UnipolSai's movement, which traders said put pressure on Generali. Two people familiar with the situation said that Generali's move was not perceived as hostile.
At a meeting early Monday, Generali said its board had unanimously voted in favor of the bid, confirming what sources had told Reuters.
Generali has € 2.3 billion left to spend on acquisitions under its current business plan by the end of 2021 and is under pressure from some of its shareholders to expand. The company recently lost to the German Alliance for assets in Poland.
The takeover is also seen as Cattolica not falling victim to foreign insurance companies that may try to grow in Italy. The country has other developed economies on the insurance front, partly due to its generous health care system and tightly composed social structure.
The takeover will enable Generali to oust Bologna – based UnipolSAI as Italy's largest player in claims.
Generali will also strengthen its presence in the life industry, where it faces growing competition from Intesa and the national postal service Poste Italiane.
Generali, which like Cattolica is based in Italy's rich northeast, said the band would return more than € 80 million a year before tax, while it estimated integration costs at € 150-200 million over the next four years. was conditional on gaining control of at least 66.67% of Cattolica, a threshold that it reserves the right to reduce to 50% plus one share.
Rothschild, Mediobanca and Bank of America advise Generali.