Insurance and asset manager Eurizon took a key step towards Italy's biggest stock market listing as it kicked off a 1.24 billion euro ($1.60 billion) buyout of fund management arm Fideuram on Monday.
The buyout will allow Eurizon, a unit of bank Sanpaolo IMI, to add Fideuram's firepower and strong brand name to its insurance and pension activities ahead of its market debut, which is expected in November, financial sources told Reuters.
Preliminary valuations by analysts put Eurizon's initial public offering (IPO) at around 3 billion to 3.5 billion euros, making it one of Europe's biggest listings this year.
Eurizon's Chief Executive Officer Mario Greco, hired from Allianz's Italian unit RAS in 2005 and an internationally respected manager, is behind the project to create the country's first real wealth manager.
"He has all the qualities to make this project successful. Eurizon's structure is unique in Italy and the group has sufficient dimensional power to challenge the market in Italy and Europe," said Roberto Lottici, a fund manager at Banca Ifigest. "The only regret is the feeling that Fideuram was worth more than the buyout price."
Eurizon is offering 5 euros for each Fideuram share of the 25.3 percent of freefloat. The buyback will run until September 20. Fideuram shares hit a high of 5.24 euros this year, but its shares plunged to around 4 euros in May amid market turbulence.
Sanpaolo, Italy's third-largest bank by market value, approved the listing of Eurizon at the end of July and said it would offer investors up to 40 percent of its unit. Of this, 25 percent will go to retail investors who will also get a bonus share for every 20 if they keep the stocks for at least 18 months.
With 180 billion euros of asset under management, Eurizon is already Italy's number one player in the field and the country's third-largest life insurer behind Generali and Ras.
But 47-year-old Greco's task is nonetheless daunting. The company he manages, which stems from Sanpaolo's unlisted insurance unit AIP (Assicurazioni Internazionali di Predivenza), was renamed Eurizon in January and its brand is little known.
"To make the brand and its products recognisable will be an obvious challenge as well as drafting a concrete industrial plan," said Claudio Morsenchio, a fund manager at Banco Emiliano Romagnolo.
Greco's track record is impressive. Under his management between 2000 and 2004, Ras doubled its net profit to 691 million euros while its stock gained 110 percent in value over 2000 to 2005.
Investors will also try to assess what degree of independence Eurizon will have from parent Sanpaolo. "Eurizon has no exclusive link with its banking parent," Greco said in an interview with Corriere della Sera at the end of July. "We can stand on our own two feet and we will be able to gain credibility."
Eurizon's distribution structure rests on Fideuram's 4,000 private bankers and on the more than 3,000 bank branches of Sanpaolo's strong retail network.
Sanpaolo has filed to list Eurizon with market regulator Consob in late July. Approval by Consob usually takes around two months, so a decision will likely come at the end of September.
The final IPO valuation will depend, among others, on the size of a capital increase Eurizon plans to carry out in September to finance most of its Fideuram's buyback, a source familiar with the issue told Reuters.
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