PREMAFIN SHARES SOAR ON INVESTMENT/MERGER TALK

Italian company Premafin, for years the financial vehicle of the Ligresti family, saw its share price soar both on Friday and yesterday – up by about 80% over the two days' trading – following rumours of new investors and a possible merger with locally based insurer Unipol. Premafin controls Italian insurer Fondiaria-SAI, which said on December 23 that it would lose about €925m ($1.2bn) in 2011 – higher than previous analyst estimates – and that it would be increasing its capital through a rights issue by some €750m. The announcements were accompanied by the news that Fondiaria-SAI's solvency position had fallen to 10 points below the 100% statutory minimum. This set the rumour mill flowing and local newspaper Il Sole 24 Ore, never slow to speculate, reported yesterday, without citing a source, that Premafin could merge with Unipol. The newspaper also claimed that private equity fund Clessidra was ready to invest €200m on top of the €750m Fondiaria-SAI cash call. The Ligresti family, headed by 79-year old Salvatore, controlled insurer SAI, which bought Fondiaria in 2002. However, last year UniCredit came in as a shareholder, reducing the Ligresti influence. The markets were seen as welcoming the prospect of a further reduction in the level of Ligresti control. Meanwhile, Fondiaria-SAI and Banco Popolare are reported to be planning to recapitalize their Popolare Vita life assurance joint venture for €120m, contributing €60m each. The reports followed S&P's decision to cut Fondiaria-SAI's rating by several notches to 'B' from 'BB+'. The rating is on CreditWatch with developing implications. An upgrade could follow a successful capital raising, while there could be a further lowering of the rating if the capital-raising does not materialize.