Intesa Sanpaolo SpA said it’s considering a merger with Assicurazioni Generali SpA, a deal that would reshape Italy’s financial industry by combining its second-biggest bank with the largest insurer.

“Possible industrial combinations with Assicurazioni Generali are currently being examined by the bank’s management,” Intesa said in a statement late Tuesday. “The bank is interested in industrial growth in the areas of asset management, private banking and insurance in synergy with its banking networks, including through possible international partnerships.”

Intesa broke its silence after three days of reports in the Italian press said the bank was preparing an offer, possibly dividing the insurer’s operations with Germany’s Allianz SE. While Generali’s stock surged, Intesa’s slumped amid skepticism from analysts and investors about the merits of a merger. Representatives for Generali and Allianz declined to comment on Intesa’s statement.

The main option being reviewed is an offer of 3 billion euros ($3.2 billion) of cash and 12 billion euros of stock for 60 percent of Generali, il Messaggero reported on Wednesday. Generali has a market value of about 24 billion euros, more than half of Intesa’s own capitalization.

Generali rose as much as 3.8 percent in Milan trading and was up 1.8 percent as of 10:16 a.m., following gains of 3.9 percent and 8.2 percent in the previous two days. Intesa fell 3.1 percent, extending a string of losses this week.

Investor Doubts

“Though we will keep an open mind, this rumored merger seems inconsistent with the company’s previously announced strategic plans,” David Herro, the Chicago-based chief investment officer at Harris Associates, said before Intesa’s statement. He said his company owns about 2.8 percent of the bank.

Consob, the Italian stock market regulator, is gathering executives from Intesa and Generali on Wednesday and Thursday, people familiar with the matter said before Intesa’s statement. Executives from UniCredit SpA, Italy’s largest bank, were summoned amid reports their firm may be involved, the people said.

Generali purchased 3 percent of Intesa on Monday in a defensive measure would prevent the bank from accumulating voting rights in the insurer without making a bid for majority control. Intesa may not immediately make a bid after Generali’s stock purchase complicated the plan, according to a person with knowledge of the matter. A lack of clarity on bank capital rules may also hold up any offer, the person said.

Intesa is being advised by UBS Group AG on a possible deal with Generali, the person said. Another adviser such as Goldman Sachs Group Inc. may be added, Messaggero reported.

Political Motive

The deal may be a politically driven initiative to create an Italian financial champion to fend off a foreign predator for Generali, according to Fabrizio Spagna, managing director at Axia Financial Research in Padua, Italy. French insurance giant Axa SA has also been mentioned in the Italian press as an interested party.

Buying a large competitor isn’t part of Axa’s strategy, CEO Thomas Buberl said at a conference on Wednesday, according to dpa-AFX. That reiterates what he said in October. An Axa spokesman declined to comment by phone.

“It’s hard to justify such a deal on an industrial perspective, considering it will add complexity and may erode capital,” Spagna said by phone.

To see a Q&A on Generali and its potential acquirers, click here.

Generali has 76,000 employees and operates in more than 60 countries. Like other European insurers, it’s struggling to boost profitability as investment returns fall and competition increases. Philippe Donnet, who became chief executive officer in March, is cutting costs and focusing on cash generation and the retail business to improve returns.

Since Donnet took over, investment chief Nikhil Srinivasan has left the company and will be replaced by Tim Ryan. Generali may name head of corporate finance Luigi Lubelli as chief financial officer, replacing Alberto Minali, Messaggero reported.


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