MILAN, April 28 (Reuters) - Italian insurer Unipol and its advisor Mediobanca will defend their plan to create Italy’s second largest insurance group to antitrust regulators on Monday, the same day a rival bidder is expected to announce its next move.
Fondiaria-SAI and its controlling company Premafin have been ordered by regulators to recapitalise after Fondiaria’s solvency ratio - a key measure of financial strength - fell to an alarming 78 percent at the end of 2011.
Powerful investment bank Mediobanca, which is also a creditor, has put together a rescue plan involving a four-way merger with smaller rival Unipol, which would involve three capital hikes.
Unipol’s bid for Fondiaria was put on hold on Thursday, however, when the antitrust agency suspended the merger for 45 days in order to investigate potential risks to competition from the tie-up, which would create Italy’s No. 2 insurer after Generali.
The antitrust decision is a setback for Mediobanca, which faces the prospect of large writedowns on its loans to Fondiaria if the insurer is forced into insolvency because the four-way merger falls through.
Much depends on whether Unipol Chief Executive Carlo Cimbri has the negotiating skills to convince antitrust officials that the merged insurer can take steps necessary to guarantee competition, and on whether the agency imposes conditions that Unipol would find too onerous.
Cimbri will meet with antitrust officials next week, Italian papers reported on Saturday.
On Monday, Fondiaria will meet with insurance regulator ISVAP to seek a delay to its pending capital increase, ordered by the regulator, until after the antitrust ruling, expected by mid-June.
Also on Monday, private equity funds Sator and Palladio Finanziaria, could announce whether they intend to extend beyond an April 30 deadline their bid for Premafin, walk away, or modify it.
Two sources familiar with the situation said on Saturday the consortium led by former Capitalia boss Matteo Arpe could unveil a new deal. “I can’t imagine they’ll just walk away after all they’ve done so far,” a third source said.
The funds have argued that all Fondiaria needs is a capital increase to restore its battered solvency ratio.
Three foreign banks, including JP Morgan, would be ready to guarantee a 400-500 million euro cash call on the market to support a stand-alone capital increase for Fondiaria, La Repubblica said on Saturday, without citing sources.
Meanwhile, also complicating the picture, Fondiaria is at the centre of a widening bankrupcy investigation involving Salvatore Ligresti, the patriarch of the family that controls Fondiaria parent Premafin.
Sources close to the probe said magistrates have put Ligresti under investigation for alleged market rigging, while requesting that two holding companies of the Ligresti family be declared bankrupt.
Should the two be declared insolvent, they could be ordered by the court to restructure their debt.
On Friday, two executives from the holdings, Sinergia and Imco, were placed under investigation by Milan prosecutors, legal sources told Reuters.
A hearing to rule on the bankruptcy is set for May 2.