MILAN – Italy’s biggest insurer Assicurazioni Generali on Monday said it would launch a €1.17billion euro ($1.4 billion) buyout offer for smaller rival Cattolica. This would further strengthen its domestic market share.
Consolidation was on the cards for Italy’s insurers when Intesa Sanpaolo took over rival lender UBI last year to build a banking and insurance giant.
Last week Italy’s second-biggest insurer UnipolSAI, which is working to expand its distribution network, raised its stake in small bank Popolare di Sondrio.
Generali rescued Cattolica last year
Last year, Generali made its first move on Cattolica rescuing it with a €300million ($366 million) investment after supervisors told the Verona-based insurer to bolster its finances. It bought almost a 24% stake thereby becoming the largest single investor in Cattolica.
For full control, and taking Cattolica private, Generali is offering €6.75 a share, which is equivalent to a 15.3% premium on Cattolica’s Friday closing price.
Cattolica’s shares rose
Cattolica’s shares rose 15% on Friday after it declared better-than-expected earnings. They had already been given a 5% boost earlier in the week when UnipolSai made their move.
Just before 10anm on Monday, Cattolica’s shares had risen a further 12.5% to €6.81 each, which is slightly above Generali’s bid price.
Cattolica declined to comment on the offer. At a meeting early on Monday, Generali said its board had unanimously voted in favour of the bid, Reuters reported.
Generali still has large acquisitions budget
Generali has €2.3billion left in the acquisitions pot under its current business plan to end-2021. Shareholders want it to expand. The company recently lost out to Germany’s Allianz for assets in Poland.
Many see the takeover as a way of keeping Cattolica in Italian hands. It would also see Generali replace Bologna-based UnipolSAI as Italy’s largest player in the non-life sector.
Generali said the acquisition would yield benefits of more than €80 million a year before taxes. Integration costs, meanwhile, could cost €150-200 million over the next four years.