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UPDATE 2-Italy watchdogs conditionally OK Unipol-FonSai merger
* Antitrust, ISVAP give clearance subject to conditions
* Unipol has already said ready to sell assets
* OK from stock market regulator outstanding (Adds ISVAP regulator decision)
By Stephen Jewkes
MILAN, June 20 (Reuters) - Italy's antitrust and insurance regulators have given conditional clearance for a plan by insurer Unipol to take over its loss-making peer Fondiaria-SAI, removing most of the regulatory hurdles hanging over the deal to create Italy's No. 2 insurer.
Unipol agreed in January to rescue the troubled Fondiaria in a deal engineered by Mediobanca, the powerful investment bank that is the leading shareholder in Italy's top insurer Assicurazioni Generali
But demands from regulators and a bitter dispute between Unipol and Fondiaria's main owners, the Ligresti family, caused the plan to be changed several times, slowing it down.
Stock market watchdog Consob still needs to approve the complex deal which envisages a four-way merger and three capital increases to firm up capital bases.
In a statement on Wednesday, Italy's antitrust authority said its blessing for the merger was subject to the sale of Fondiaria's stake in Generali and of Fondiaria parent Premafin's stake in Mediobanca.
Italy's insurance regulator ISVAP said Unipol will have to guarantee a solvency ratio for the new entity above the standard regulatory requirement of 120 percent. Fondiaria has a solvency ratio below 100 percent.
Debt-ridden Premafin, which holds more than 35 percent of Fondiaria, is controlled by the Ligrestis.
Family patriarch Salvatore was known as "Mr 5 percent" because of the small shareholdings he had in financially strategic companies.
Mediobanca, for years at the crossroads of Italian finance, holds more than 1 billion euros of Fondiaria debt.
In its statement the antitrust body also said Italy's biggest bank UniCredit, a shareholder of Fondiaria and creditor bank at Premafin, must not take part in the future governance of the new entity.
The watchdog said Unipol will have to sell insurance portfolios containing "significant amounts of premiums", as well as brands and agency networks to secure clearance.
It said the new group that will be created would have to reduce its national and regional market share in the various insurance sectors to below 30 percent.
ISVAP asked for the new merged group to have board members independent from the Ligresti family and to name a different chief executive from that of Unipol.
A takeover of Fondiaria by Unipol would create a company with 32 percent of Italy's non-life insurance sector and around 37 percent of its motor insurance business, able to compete with Generali.
Unipol has said it was ready to sell parts of its business and dispose of FonSai's stake in Mediobanca to get antitrust clearance.
On Monday ISVAP had said it would put an administrator into Fondiaria if it did not come up with measures to address irregular dealings between the company and the Ligrestis. (Additional reporting by Danilo Masoni, Alberto Sisto, Antonella Ciancio; Editing by Keiron Henderson and Phil Berlowitz)
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