Generali's M&A push defies nationalist reflex
By Lisa Jucca
(The author is a Reuters Breakingviews columnist.)
MILAN, May 22 (Reuters Breakingviews) - Assicurazioni Generali's M&A push offers a timely riposte to its own shareholders' nationalist reflex. The Italian insurer wants to buy MetLife's central and eastern European assets for around 2 billion euros, Bloomberg reported. That would strengthen the Italian insurer's already sizable base outside its home turf. Diversification offers investors better prospects than some large shareholders' obsession with keeping the 26 billion euro group in Italian hands.
Expanding eastwards makes strategic sense. Generali has been present in the region since shortly after its foundation in 1831. It operates in 12 markets from Austria to Russia and wrote 6.4 billion euros of premiums in these countries in 2018, roughly 10% of the total. And eastern Europe offers higher growth prospects than stagnant, ageing Italy.
Generali's dealmaking drive coincides with a push by some of its large Italian shareholders to ensure it doesn't fall into foreign hands. Toll roads-to-clothing magnate Luciano Benetton - whose family, via Edizione , hold 4% of the insurer - recently told Italian newspaper La Repubblica that he, Leonardo Del Vecchio and Francesco Gaetano Caltagirone, who between them own around 14% percent, were ready to boost their stakes to fend off any potential foreign acquirer.
It's hard to justify such corporate nationalism. Creating domestic champions can give companies extra clout and safeguard jobs. Yet Benetton's comments hark back to a bygone area. The cozy shareholder pacts that allowed a group of investors to control large Italian companies are being dismantled.
Mediobanca , whose founder Enrico Cuccia was an ardent proponent of this type of capitalism, can no longer control Generali with its roughly 13% stake, and recently dissolved its own shareholder pact. Attempts to shield Generali could depress its valuation, and muddle its governance. By embarking on a new wave of deals, the insurer is showing that its prospects rely on other countries welcoming it, not pulling up the drawbridge.
- Italian insurer Assicurazioni Generali is in talks to buy the central European assets of MetLife, Bloomberg reported on May 21 citing people with knowledge of the matter.
- The targeted assets may be worth more than 2 billion euros ($2.2 billion) and are concentrated in Poland, the Czech Republic, Hungary and Romania, Bloomberg added.
- Generali's CEO Philippe Donnet said at the company Investor Day in November Generali could deploy 3 billion euros to 4 billion euros to reinforce its position in Europe.
- Luciano Benetton, founder with his sibling of an industrial empire spanning motorways to clothes, told Italian daily La Repubblica on May 19 he wanted Generali to remain in Italian hands. He added that he and Italian investors Francesco Gaetano Caltagirone and Leonardo Del Vecchio were ready to increase their current stakes in Generali.
- The Benettons, through their holding company Edizione, have doubled their stake to 4% since 2016. Caltagirone owns 5% and Del Vecchio owns 4.9%. Caltagirone owns 5% and Del Vecchio owns 4.9%.
- Investment bank Mediobanca is Generali's biggest shareholder, owning just below 13%. The bank has been gradually reducing its investment in Generali and could cut it further to pursue acquisition opportunities.