Generali targets deeper cuts in attempt to stay independent
Italian insurer shores up defences against potential bid from country’s largest bank
Italian insurer Generali is planning to raise its cost-cutting target in an effort to defend itself against a potential bid from Intesa Sanpaolo, the country’s largest bank by market value.
The mooted deal would reshape Italian finance, creating a financial colossus in Italy with a combined market value of €60bn, dwarfing Intesa’s nearest rival UniCredit and resurrecting the controversial bancassurance model.
Generali, which has not been approached directly by Intesa, is critical of the strategic logic of the deal.It has already promised to cut €200m, or 4 per cent, off its cost base in mature markets by 2019. But people familiar with its thinking say it plans to propose deeper cuts as it tries to persuade shareholders to back its independence.
They said any increase in the target for cuts would be modest. One person who has advised on the issue said the final number was likely to be 6 or 7 per cent, but still well short of proposals for radical cuts of up to 20 per cent made by some advisers.
The move by Generali comes after Carlo Messina, Intesa’s chief executive, met many of the bank’s biggest investors in the past week seeking to convince them of the logic of his plan to boost Intesa’s asset management business by acquiring the insurer.
Mr Messina told investors he wants a “friendly merger” and plans to approach both Generali and the insurer’s core investors, including Italian investment bank Mediobanca and several Italian billionaire industrialists, say people briefed on those meetings.
This tactic is seen by some people as an attempt to prepare the ground for Intesa to make a bid at a low premium as Mr Messina has pledged to his investors that any deal would not hurt its capital position or dividend prospects.
Intesa has already ruled out an all-share swap, bankers say because this would result in Mediobanca, Generali’s largest shareholder with a 13 per cent stake, becoming one of Intesa’s top investors.
Mr Messina, who is well connected politically, has told colleagues that he wants to publicly announce whether he will proceed with an offer for the insurer by the end of this month. Generali is working plans to unveil its new cost cuts next month.
Generali, which controls €500bn in assets, is considered a key asset in Italy as it is a major buyer of national debt. Intesa’s mooted approach is being watched closely in Rome, and welcomed in some quarters amid rising fears of foreign takeovers of Italian companies. The insurer ruffled feathers in the Italian establishment recently by refusing to support bank rescues such as the latest Atlante fund.
Pier Carlo Padoan, Italy’s finance minister, has told parliament that Rome is in favour of Generali remaining Italy-based and retaining an international reach, a statement taken as equally supportive of Generali remaining independent and an Intesa-led takeover.
While there has been speculation that Intesa would look to break up Generali — potentially selling its German and French arms to foreign rivals — the Italian bank is now keen to preserve the insurer’s presence in core countries including Italy, France, Germany and China.
Alberto Nagel, Mediobanca’s chief executive, fanned speculation of a deal last week by telling analysts he had sold some Generali shares last year at €17 to €18 each. Nonetheless, Mr Nagel also said the bank was sticking to its plans to sell only 3 per cent of the insurer by 2019.
Shares in Generali have gained 20 per cent in the past year, boosted by takeover speculation. But over a five-year period they have lagged behind those of European rivals Axa and Allianz by about 60 per cent.