Italian insurance firm Assicurazioni Generali SpA (ARZGY.PK) Tuesday said it agreed to buy the remaining 49 percent stake in GPH joint venture from privately held financial firm PPF Group for 2.52 billion euros, terminating their partnership in Central and Eastern Europe. At the same time, GPH will sell consumer finance insurance business in CIS countries, such as Russia, Ukraine, Belarus and Kazakhstan, to PPF for 80 million euros. The entire transaction is subject to the approval of the relevant authorities.
Generali already holds 51 percent of GPH and would purchase the remaining stake in two stages. By March 28, 2013 Generali would buy 25 percent of GPH for 1.286 billion euros and 24 percent by December 31, 2014 for 1.235 billion euros.
The initial amount will be used to reimburse around 51 percent of a bond underwritten by Generali and issued by a PPF unit in 2009, and 51 percent of the loan granted to PPF in 2007 by a pool of lender banks.
Generali added that the deal will also include a no-cash equity swap with it acquiring from PPF Investments its stake in PPF Beta, which indirectly holds a 38.46 percent interest in the Russian insurer Ingosstrakh. Meanwhile, PPF will acquire the 27.5 percent interest held by Generali in the PPF Partners fund manager, run by PPF, and the PPF Partners 1 Fund L.P. shares held by Generali.
At the closing of the first tranche, Generali will take full management control of GPH with the right to appoint executives. As a minority shareholder, PPF will have the right to appoint two of the eight directors on the board of GPH until the end of 2014.
Generali CEO Mario Greco said, "This transaction eliminates all uncertainty over our development strategy in Central and Eastern Europe and the resources required from the Group to put it in place. With full control of GPH, we shall be able to take full advantage of our investment and focus on developing our core insurance business while improving competitiveness and profitability."
GPH, an insurer in the Central and East European market, recorded gross premiums in that area of 4 billion euros at the end of 2011, from approximately 1 billion euros at the end of 2007, while the number of clients has increased to 14 million from 4 million.
Under the deal, GPH would pay the shareholders 66 percent of profits during the period between 2013 financial report's approval and the end of the shareholders' agreement.
In the transaction, Goldman Sachs International acted as financial advisor to Generali.
In Italy, Generali shares are currently trading at 14.47 euros, up 0.11 euros or 0.77 percent.
by RTT Staff Writer
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