PE firms lose Fondiaria to Italian inner circle

Over the course of several months, the private equity duo offered to inject up to €800m into Fonsai, in a bidding war that filled column after column of the national press and has since sparked fierce debate surrounding the power brokers of Italian industry.

The final bid made by the private equity players, which jointly owned 8% of Fonsai, was rejected in late July in favour of a four-way merger with other insurance firms. In early August, the national courts denied their appeal against the merger.

The merger sees insurance giant Unipol take a controlling stake in Fonsai parent company Premafin through a reserved capital increase, which will trickle down to Fonsai. The final stage sees the merger of Unipol, Fondiaria-Sai and Premafin with Milano Assicurazioni, a subsidiary of Fonsai, to create what the Italian press has dubbed ‘Grande Unipol'.

PE firms lost their bids for Fondiaria to the "inner circle" of Italian business. But perhaps they got off lightly

But the plot thickened recently, as Alberto Nagel, chief executive of Milanese investment bank Mediobanca, was brought in for questioning by prosecutors following allegations of obstructing the work of regulators.

Mediobanca, owed €1.1bn by Fonsai in subordinated debt, had fully supported the four-way merger, brokering the deal. Protecting the interests of minority shareholders, the Italian stock market regulator Consob agreed to the merger on condition that the Ligresti family, the majority shareholder in Fonsai, did not gain a single euro from the deal.

But prosecutors suggest a letter bearing Nagel's initials grants Ligresti a payout of around €45m and a litany of other benefits. To cash in, Ligresti was asked not to speak against the marriage of the Premafin-Fonsai group to Unipol, and forever hold his peace.

Nagel claims his initials feature on a photocopied document and symbolise acknowledgment of the original letter, as requested by the Ligresti family, and not the endorsement of a binding agreement. The authorities though are unsure. If rumours are to be believed, and should the document be an official contract, Mediobanca stands to lose a lot; the stock market regulator could impose the compulsory administration of the firm, leaving Mediobanca's balance sheet €1.1bn lighter.

It seems the definitive shelving of a credible solution proffered by the private equity community has left the inner circle of Italian industry to tighten its grip on an industry giant. In a speech to 400 key figures from the global financial sector, Mario Monti criticised the salotto buono for having artificially maintained the status quo in Italian industry by protecting against the process of creative destruction. The initialled document has as much to say about the nation's antiquated power brokers as it does one man's alleged greed.

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• Topics
• Southern Europe
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• Italy