Unipol Gruppo Finanziario SpA would hold about 67 percent of insurer Fondiaria-SAI SpA after a planned merger is completed, valuing the biggest investor in Italy’s second-largest insurer at a 33 percent discount.
Unipol said it values shares of Premafin Finanziaria SpA, Fondiaria’s controlling shareholder, at as much as 19.5 euro cents ($0.26) a share, according to a stock-exchange statement. That’s 33 percent lower than Premafin’s last trading price before its suspension today. Unipol’s proposed terms of the merger would allow it to hold 66.7 percent of the new entity.
“In the best case for Unipol, and worse case for Fondiaria-SAI and Milano minorities, Unipol will hold 66 percent of the new company,” Atanasio Pantarrotas, an analyst at Credit Agricole Cheuvreux said in a note April 13.
Unipol agreed in January to buy new shares in Premafin as part of a plan to rescue unprofitable Fondiaria. The purchase will allow Premafin to participate in the 1.1 billion-euro stock sale announced by Fondiaria on Jan. 30. After the capital increase, Unipol’s insurance unit, Premafin, Fondiaria and its unit Milano Assicurazioni SpA will merge to challenge Italy’s biggest insurer, Assicurazioni Generali SpA.
Premafin’s board is meeting today to review Unipol’s evaluation. If directors approve the plan, both Fondiaria and Milano’s boards will discuss it later today.
Fondiaria, which gets most of its revenue from property and casualty businesses, is suffering from rising claims and tougher competition at home. The insurer posted a net loss of 852.7 million euros last year, after it wrote down the value of non-strategic assets and real estate by 657 million euros.
Unipol, based in Bologna, forecast the newly merged entity will have more than 300 million euros of additional revenue and cost savings by 2015. It targets net income of 970 million euros in 2015, and a combined ratio, or claims and expenses as a percentage of premiums, of 93 percent at the end of 2015, indicating profitable underwriting, the company said March 15.
Shares of Unipol, Fondiaria, Premafin and Milano Assicurazioni were suspended at 4:42 p.m today pending news. Unipol fell 5.2 percent to 19.85 euros in Milan before being suspended. Fondiaria dropped 5.9 percent to 82.8 cents and Premafin rose 0.4 percent to 29.22 cents.