Mediobanca to buy consumer credit business

MILAN (Reuters) - Italian merchant bank Mediobanca (MDBI.MI: Quote, Profile, Research, Stock Buzz) has agreed to buy most of Linea from two banks in a cash deal that values the consumer credit business at 405 million euros ($587.5 million).

Mediobanca said on Thursday its Compass unit would buy 96 percent of the business from Banco Popolare (BAPO.MI: Quote, Profile, Research, Stock Buzz) and Banca Popolare di Vicenza. Each bank owns 47.96 percent of Linea.

The deal, signed on December 24, could be extended to the remaining minority shareholders, it said.

Mediobanca said the purchase would further diversify its sources of income and enable it to create Italy's third biggest player in the sector with a market share of 8.5 percent.

The deal, expected to close in the first half of 2008, will lead to about 40 million euros in cost savings and begin contributing about 2 percent of earnings in 2009.

"The combined entity will be able to achieve economies of scale, maximize cross-selling and optimize operating processes and risk management," it said.

Mediobanca did not give the purchase price, but Banco Popolare said in a separate statement it had sold its 47.96 percent stake for 194.2 million euros for a net capital gain of about 93 million euros.

The remaining shareholders in Linea include cooperative banks Popolare di Sondrio, Popolare dell'Emilia Romagna, Popolare del Lazio, and Popolare di Marostica.

Mediobanca shares were off 0.35 percent at 14.07 euros, while those in Banco Popolare were off 0.07 percent at 14.93 euros.

(Reporting by Gilles Castonguay, Editing by Erica Billingham/Rory Channing)