Generali Guards Italy Dominance With $1.4 Billion Cattolica Deal

Italy’s largest insurer Assicurazioni Generali SpA launched a 1.2 billion-euro ($1.4 billion) bid to buy all the shares it doesn’t already own in smaller rival Societa Cattolica di Assicurazioni, as part of a strategy to cement its already-commanding presence in the home market.

Generali, which has a stake of about 24% in the company, is offering investors 6.75 euros per Cattolica share in an all-cash transaction, the insurer said in a statement on Monday. The offer represents a 15% premium on the last closing price and values the smaller rival at 1.5 billion euros.

Generali reorganized its top leadership earlier this year to focus on driving profitability growth. The deal adds to a flurry of transactions in the domestic insurance sector that has totaled more than 10 billion euros in the past year, according to data compiled by Bloomberg.

“The acquisition would allow Generali to become the first in the non-life insurance market and to strengthen its presence in the life market,” the insurer said in a statement. The transaction is fully aligned with business plan’s “disciplined approach to M&A and its commitment to deliver profitable growth and create value for customers and shareholders.”

Cattolica rose as much as 14% and was up 13% at 6.83 euros as of 12:32 p.m. in Milan, above the offer price. Generali shares also rose, trading at 16.93 euros.

Generali is also seeking cost cuts, digitalization, and expansion in more lucrative products and high-margin insurance to boost profitability. Chief Executive Officer Philippe Donnet said last month the firm would consider mid-size deals in the insurance companies and asset management sectors. After the the Cattolica transaction, the company has cash left over from an originally-earmarked 2.3 billion euros for acquisitions.

Sector Moves

The insurer is in exclusive talks to buy non-life insurance businesses in Malaysia from AXA and Affin Bank, people familiar with the matter said in April. In Europe, Generali was in the running to buy the Polish operations of Aviva Plc, though rival Allianz SE emerged as winner.

Cattolica is an insurance company with a market capitalization of almost 1.4 billion euros. The firm agreed to convert to a joint stock company in July, and planned to raise 500 million euros. Assicurazioni Generali subscribed to 300 million euros, becoming the main shareholder in October. The second biggest investor in Cattolica is a unit of Warren Buffet’s Berkshire Hathaway Inc., which holds a stake of about 9%.

Zurich Insurance Group is considering selling a chunk of mostly life insurance assets in Italy, while Apollo Global Management is planning sale of Italian life insurance business Amissima Vita. Cinven is selling life-insurance company Eurovita.

Generali’s board unanimously approved the deal. The company said it sees annual synergies exceeding 80 million euros before tax from the Cattolica tie-up, while total integration costs are estimated in a range between 150 million euros and 200 million euros.

Generali’s offer was conditional on at least 66.7% of the shares being held after the tender, though it had said it would consider whether to proceed with acceptances if will own at least 50% plus one share. Rothschild & Co. ^, Bank of America Corp, and Mediobanca SpA are advising Generali on the deal.

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