Reuters: Global Markets: Unipol, Fondiaria shares slide on merger issue pricing

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Unipol, Fondiaria shares slide on merger issue pricing Jul 6th 2012, 10:21 MILAN | Fri Jul 6, 2012 6:21am EDT MILAN (Reuters) - Shares in Fondiaria-SAI (FOSA.MI) and Unipol (UNPI.MI) were suspended because of heavy falls on Friday after the two insurers offered discounts for the rights issues that are part of their plans to merge to create Italy's second-biggest insurer. Unipol offered a 27.2 percent discount for the ordinary shares in its 1.1 billion euro ($1.36 billion) cash call, while Fondiaria gave a 24.7 percent discount on a similar-sized issue. "The discount is similar to recent operations of this kind but we couldn't have expected any more given the enormous amount of shares issued and the dilution involved," a Milan trader said. Concern has been expressed that it could be difficult to get the rights issues away without a hefty discount, in light of challenging market conditions and financial strains at Fondiaria. The insurer, which only five years ago had a market capitalization of 5 billion euros, has seen its value shrink to about 387 million euros. Unipol agreed in January to rescue its loss-making peer in a deal brokered by investment house Mediobanca (MDBI.MI). However, a judicial investigation, regulatory hurdles and disputes between Fondiaria's main owners, the Ligresti family, and Unipol have muddied waters, placing further strain on Fondiaria's depleted capital base as the euro zone crisis deepened. In a key decision on Thursday, Italy's market regulator, Consob, ruled that Unipol did not need to buy out the minorities of a unit of Fondiaria, removing one of the last hurdles to the merger, which should be completed by the start of 2013. Unipol and Fondiaria, which expect to launch the rights issues on Monday, are still waiting for the banks involved in the underwriting consortium to sign the final contract. One source close to the deal said on Friday that some of the banks would have preferred to launch the cash calls in September. Mediobanca, which holds debt at Fondiaria to the tune of more than 1 billion euros, is organizing the consortium. Shares in Unipol and Fondiaria were suspended at 0925 GMT after falling by 6.8 percent and 6 percent respectively. ($1 = 0.8077 euros) (Reporting by Stephen Jewkes and Andrea Mandala; Editing by David Goodman) Link this Share this Digg this Email Reprints

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