UPDATE 3-Unipol rescues Fondiaria in four-way merger

* To offer 0.3656 euro per Premafin share

* Merger to create a national insurance champion

* Deal ends control of once-powerful Ligresti family (Recasts lead, adds details on Ligrestis, shares)

By Stephen Jewkes

MILAN, Jan 13 (Reuters) - Italian insurer Unipol has agreed a four-way merger to rescue Fondiaria-SAI , in a deal that will create one of the country's biggest insurers and end the once-powerful Ligresti family's control of the group.

The planned merger would see Unipol taking over Fondiaria's parent company Premafin as a first step, and involve capital increases at Fondiaria-SAI, Premafin and Unipol that could total over 2 billion euros ($2.6 billion).

After the Premafin takeover, Unipol would merge its insurance arm with Fondiaria-SAI and its unit Milano Assicurazioni.

The deal, aimed at safeguarding the solvency of the Ligresti-controlled Fondiaria group, is subject to market regulator Consob exempting Unipol from mandatory bids on Fondiaria-SAI and Milano Assicurazioni, Unipol said on Friday.

Fondiaria-SAI, Italy's biggest motor insurer, is 35.8 percent owned by Premafin which, in turn, is controlled by the Ligresti family. Fondiaria-SAI controls Milano Assicurazioni.

The planned combination would create a new giant in the Italian insurance market, currently led by Assicurazioni Generali. An enlarged Unipol would control some 32 percent of the non-life segment and 10 percent of the life insurance sector, Mediobanca analysts said in a note to clients.

Under the agreement, cooperative-owned Unipol will pay 76.9 million euros to buy 51.3 percent of Premafin at 0.3656 euro per share, a 26 percent premium to Thursday's close. It will then launch a bid for the remaining shares.

Mediobanca said that while "synergies for Unipol could be massive", it expected shares to remain under pressure due to the rumoured size of the capital increase at Unipol - reports have talked of around 1 billion euros.

Unipol shares were down 3.2 percent at 0.1944 euro by 1602 GMT. Premafin soared 17.4 percent to 0.3406 euro, Fondiaria-SAI gained 4.9 percent to 0.68 euro, and Milano Assicurazioni rose 6.9 percent to 0.2400 euro.

Because of the size of the new group's market share in non-life and motor insurance, analysts said the new Unipol could be called on by antitrust regulators to sell certain assets.

LIGRESTI ADIEU

The debt-laden Ligresti family will sell its controlling shares in Premafin, bringing an end to its 10-year rule at the insurance group.

Sicilian-born family patriarch Salvatore Ligresti built his business empire on real estate and construction. At the urging of Mediobanca, his SAI insurer took over Fondiaria in 2002.

Known as "Mr. 5 percent" on account of small but strategic stakes he built in influential Italian companies like Pirelli , CIR (CIRX.MI> and RCS, Ligresti's control of Fondiaria took him inside Italy's financial elite.

But as the financial crisis bit hard and Fondiaria results disappointed, Mediobanca and UniCredit, its main creditors, brought pressure on the Ligrestis to take more of a back seat in management.

In October, Fondiaria, which had debt of around 1.4 billion euros at the end of September, said it would miss financial targets for 2011 due to writedowns amid the sovereign debt crisis.

Then in December, its creditors forced it to announce a capital increase of up to 750 million euros following a 450 million cash call earlier in the year.

Mediobanca, which is putting together the underwriting consortium for the Fondiaria capital increase, has an exposure to the Fondiaria-SAI group of around 1 billion euros.

Analysts said UniCredit and Mediobanca -- tied to Fondiaria through a complex cross-shareholding web and widely seen as drivers of the Unipol deal -- did not look with favour at the insurer falling prey to foreign groups because of their stakes in Assicurazioni Generali

($1 = 0.7814 euro) (Additional reporting by Danilo Masoni and Paola Arosio; Editing by Dan Lalor and Erica Billingham)