Fondiaria's Parent Company Accepts Unipol Offer For Capital Increase

The parent of Italian insurer Fondiaria-SAI SpA (FSA.MI) has accepted the price offered by Unipol Gruppo Finanziaria SpA (UNI.MI) to take part in a capital increase in the first of a series of operations designed to have Unipol take control of Fondiaria-SAI and create the country's second-biggest insurer.

The parent, Premafin Finanziaria SpA Holding di Partecipazioni (PF.MI), said in a statement the price offered by Unipol--EUR0.195 per share--was at the bottom of the range of EUR0.195 to EUR0.305 that it was proposing for its capital increase.

In a separate statement, Unipol said the price was the most it was willing to pay.

The price was lower than what at least two observers had expected.

"Valuing Premafin at EUR0.195 means valuing [Fondiaria-SAI] at about EUR3...below the EUR3.95 [that Premafin had put Fondiaria-SAI on its books]," a Milan dealer told MF-Dow Jones.

This apparent consensus on price comes after a weekend full of talks as the parties involved rushed to agree on the latest terms ahead of their respective shareholder meetings scheduled for the coming weeks.

Premafin's capital increase would let Unipol take a controlling stake in it. Once completed, Unipol would then take part in a capital increase by Fondiaria-SAI in order to take control of it too.

In the end, Unipol is to fold Premafin, Fondiaria-SAI and a small subsidiary called Milano Assicurazioni SpA (MI.MI) into itself to create a single insurance company that would rival Assicurazioni Generali SpA (G.MI), the biggest in Italy by premiums.

"(Unipol would) hold a participating interest in the ordinary share capital of Fondiaria...equal to 66.7%," Unipol said of the final shareholder structure.

Shares in all four companies were halted from trading in Milan ahead of the news.

This complex operation would mark the end of the Ligresti family's presence in the insurance business in Italy. Saddled with hundreds of millions of debt, the family has been forced to relinquish control of Premafin because it is unable to take part in Fondiaria's capital increase, a necessary operation because the insurer's solvency ratio is below the 100% minimum. The ratio indicates an insurer's ability to honor claims.

The agreement is being contested by two rival investors--Palladio Finanziaria SpA and Sator Capital Ltd--that have come up with their plan to salvage Fondiaria-SAI.

But the exclusivity of its talks with Unipol prevents Premafin from considering their offer.

-By Gilles Castonguay, Dow Jones Newswires; +39 02 5821 9908; gilles.castonguay@dowjones.com; Twitter: @GRCastonguay

--Marco Fusi of MF-Dow Jones contributed to the article.

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