Apollo offers to buy majority of Italy's Carige via 550 million euros cash call

MILAN (Reuters) - U.S. fund Apollo Global Management APO.N has offered to buy a controlling stake in Italian bank Carige CRGI.MI by acquiring the bulk of a 550-million euro ($559 million) share issue, the lender said on Tuesday.

The logo of Carige bank is seen in Rome, Italy, March1 2016. REUTERS/Alessandro Bianchi

Confirming Italian press reports, Carige said Apollo would buy 500 million euros worth of new stock, with the remaining 50 million euros offered to existing shareholders. The Genoa-based lender has a stock market value of 478 million euros, so the deal would give Apollo a majority stake.

Saddled with bad loans and weak profitability, Italian banks are bracing for a wave of consolidation and a shake-up of their investor base after last week's merger between Banco Popolare BAPO.MI and Banca Popolare di Milano PMII.MI.

That deal was the first tie-up following a 2015 government decree intended to encourage banking mergers.

Carige’s stock rose 6.2 percent to 0.6080 euros by 0911 GMT (5.11 a.m. ET).

Apollo has also offered to buy Carige’s non-performing loans (NPLs), which were worth a gross 3.5 billion euros at the end of 2015, the bank said without saying how much the fund would pay.

Two sources close to the matter said Apollo had bid 695 million euros for the NPLs. This would force Carige to book additional writedowns of 691 million euros, so Apollo is in effect offering to plug most of that loss via the share issue.

The European Central Bank has told Carige to examine Apollo’s proposal, one of the sources said, adding the deal would “resolve all of Carige’s problems. It cleans up the balance sheet and recapitalizes the bank.”

The ECB declined to comment. Apollo did not reply to an e-mail requesting comment.

The bank said it would be up to its new board, to be appointed at a shareholder meeting on March 31, to assess Apollo’s proposal. It said the U.S. fund had presented the revised, non-binding offer in a letter dated March 23, after the bank’s board shunned a proposal submitted on Feb. 10.

It was not immediately clear whether under Italian rules Apollo would have to launch a mandatory bid for Carige’s outstanding stock, or whether the deal would be considered a rescue, exempting the fund from such an obligation.

Apollo had already bought Carige’s insurance units in 2014 after the Genoa-based bank emerged among the weakest lenders in a euro zone health check of the sector.

Its top shareholder is local entrepreneur Vittorio Malacalza with 17.6 percent. Malacalza has pushed for management change at the bank and his own candidate, Guido Bastianini, is set to be appointed chief executive.

Editing by David Holmes