June 26, 2012 / 6:36 PM / in 7 years

UPDATE 2-Pamplona Capital buys 5 pct of Italy's UniCredit

By Silvia Aloisi and Douwe Miedema

MILAN/LONDON, June 26 (Reuters) - A fund backed by Russian billionaire Mikhail Fridman’s Alfa Group has bought 5 percent in UniCredit, making it the second-largest shareholder in Italy’s biggest bank.

The stake, bought by London-based Pamplona Capital Management, is worth about 750 million euros ($935.33 million) at current market prices and is one of the largest investments by a foreign operator in a listed Italian group this year.

Pamplona - headed by Alex Knaster, a former Alfa Bank Chief Executive - already owned just under 2 percent of UniCredit, a stake too small to be made public under Italian disclosure rules. It has now added another 3 percent.

It was the first acquisition by Pamplona’s 1 billion euro ($1.25 billion) Global Financial Institutions Fund, which aims to make profits through medium- to long-term investments in banks as the sector heads into a major restructuring.

The deal had been approved by Italian regulators, a spokesman for Pamplona said.

The purchase makes Pamplona the second-largest investor in UniCredit, behind the Abu Dhabi investment fund Aabar, which owns 6.5 percent of the bank.

Russia’s Alfa Group - chaired by Fridman - was a cornerstone investor in Pamplona when it was established in 2005. It is also one of the investors in the global financial institutions fund, launched in November of last year.

Knaster sits on the board of several companies in the Alfa Group, according to Pamplona’s website.

He was the Chief Executive Officer of Alfa Bank - which is part of the conglomerate, and is 36-percent owned by Fridman - between 1998 and 2004. Knaster still owns 4 percent of the Russia-based bank.

Knaster also sits on the board of Russia’s No.3 oil firm TNK-BP, a joint venture with British oil major BP in which Fridman participates. He previously ran Credit Suisse’s operations in Moscow, between 1995 and 1998.

Forbes magazine lists him as number 913 in their global list of billionaires, with a net worth of $1.4 billion.

A source close to the deal said Pamplona believed UniCredit was well positioned to benefit from the upcoming restructuring of the European banking industry.

“The management team is excellent, their footprint in Europe is very good and they can seize growth opportunities in emerging European markets,” the source told Reuters.

UK-based Pamplona Capital Management manages more than $6 billion in assets for a range of clients, including pension funds. UniCredit shared closed down 2.44 percent on Tuesday. The stock has fallen more than 40 percent this year.

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