Unipol in four-way merger with Fondiaria group

MILAN (Reuters) - Italian insurer Unipol (UNPI.MI) has agreed a four-way merger with troubled peer group Fondiaria-SAI (FOSA.MI), in a deal that will create one of the country's leading insurance groups and provide succor to creditor banks.

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

After the Premafin takeover, Unipol said on Friday it would merge its insurance arm with Fondiaria-SAI and its unit Milano Assicurazioni (ADMI.MI).

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

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, controlling 32 percent of the Italian non-life insurance market and 10 percent of the life insurance sector, Mediobanca analysts said in a research note.

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 while "synergies for Unipol could be massive," it expected the share price to remain under pressure due to the rumored size of a capital increase Unipol was due to launch -- analysts and reports have said Unipol could ask for a cash call of around 1 billion euros.

Finsoe, the cooperative-owned vehicle which controls just over 50 percent of Unipol, does not want to be excessively diluted in the merger deal, a source said.

Unipol shares were up 2.0 percent at 0.2049 euro by 1045 GMT. Premafin soared 19 percent to 0.3460 euro, Fondiaria-SAI gained 9.7 percent to 0.7110 euro, and Milano Assicurazioni rose 8.2 percent to 0.2429 euro.

LIGRESTI ADIEU

Under the deal the Ligresti family, grappling with debt problems, will sell its shares in Premafin. The Ligrestis have controlled the Fondiaria group since 2002, combining the insurance business with its traditional real estate activity.

Results at the insurer have been poor in recent times. In October, Fondiaria said it would miss financial targets for 2011 because of writedowns to investments amid the sovereign debt crisis.

In December, Fondiaria-SAI announced a capital increase of up to 750 million euros following a 450 million cash call earlier in the year.

Fondiaria-SAI's creditor banks include Mediobanca (MDBI.MI) and Italian bank UniCredit (CRDI.MI), which owns 6.9 percent.

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 have said a merger could create antitrust problems, prompting the sale of assets. There has been speculation Unipol could sell its troubled banking unit Unipol Banca.

($1 = 0.7814 euro)

(Additional reporting By Danilo Masoni; Editing by Dan Lalor)