Assicurazioni Generali SpA and BPCE have reached a preliminary deal to combine their investment units and create Europe’s second-largest asset manager amid a deal wave in the industry.
The two firms signed a non-binding memorandum of understanding for a joint venture between Generali Investments Holding and Natixis Investment Managers, they said in a statement Tuesday. BPCE and Generali are set to own 50% each in the entity, which would have about €1.9 trillion ($2 trillion) under management.
The Franco-Italian venture would be valued at about €9.5 billion, the companies said, and rank as the largest European asset manager behind Amundi SA.
Generali Near Deal With Natixis for Asset Management Venture
The deal comes as many European asset managers are looking for acquisitions and partnerships in a bid to boost scale. BNP Paribas SA last year agreed to buy AXA SA’s fund unit while Amundi has recently held talks with German insurer Allianz SE about a potential deal involving its investment arm Allianz Global Investors, Bloomberg News has reported.
Bloomberg reported earlier this month that Generali and BPCE’s Natixis are close to a deal. Both firms operate a boutique model, with various affiliates run with a degree of autonomy. Natixis IM owns firms including Harris Associates and Loomis Sayles in the US, while Generali’s affiliates include Conning & Co., which recently agreed to buy control of New York-based credit investment firm MGG Investment Group.
“Generali and BPCE would retain full authority over asset allocation decisions for their respective assets,” the Italian company said in the statement. The holding company for the joint venture is expected to be based in Amsterdam, with France, Italy and the US remaining operational hubs.
BPCE Chief Executive Officer Nicolas Namias is set to become chairman of the venture, with Generali CEO Philippe Donnet acting as vice chairman of the board. GIH chief Woody Bradford would run the new firm and his counterpart at Natixis IM, Philippe Setbon, would become deputy CEO.
Of the total money overseen, 61% would be in Europe and 34% in North America. Insurers and pension funds would account for more than half of the assets in the joint venture.
Generali also agreed to commit €15 billion in “seed and acceleration capital” to the affiliates over five years. The insurer said it would deconsolidate its asset management unit GIH from its accounting perimeter.
Cathay Life, the subsidiary of Cathay Financial Holding Co. that acquired almost 17% in GIH when it sold Conning to the Italian company, would remain a strategic partner.
Shares of Generali fell 1.3% at 10:27 a.m. in Milan. BPCE isn’t publicly traded.
“Scale is a strategic imperative in this industry in order to remain competitive,” Philip Kett, an analyst at Jefferies Financial Group Inc., wrote in a note. “The main downside of the deal is that Generali will end up with a rather small share of the business.”
Some members of Generali’s board, representing the insurer’s third-biggest shareholder Francesco Gaetano Caltagirone, voted against the tie-up, people familiar with the matter said. The Italian construction tycoon has repeatedly sought to influence the insurer’s strategy and clashed with its senior management in the past.
“The vast majority had approved this operation, I am really happy about that,” Donnet said on a call.
“I will not comment on the hypothetical initiative of some shareholders on the so-called risk of sending the Italian money to France,” he added. “This is a joke because our investment process will not change.”
Representatives for Caltagirone declined to comment.
Photograph: The Assicurazioni Generali headquarters in Milan, Italy; photo credit: Francesca Volpi/Bloomberg
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