Italian insurer Generali takes control of eastern European venture in £2.5bn deal

Italian insurance major Generali SpA (BIT:G) on Tuesday announced a EUR2.52bn (USD3.3bn) deal that would see it take full control of its eastern European joint venture GPH and put an end to its partnership with PPF Group in the region.

Under the terms of the agreement, Generali will buy an initial 25% in GPH by 28 March 2013 for EUR1.29bn and take the remaining 24% at the end of 2014 for EUR1.23bn, it said. Meanwhile, the JV will sell its insurance operations in Russia, Ukraine, Belarus and Kazakhstan, in consumer finance insurance for EUR80m to PPF Group.

Commenting on the transaction, the Italian group’s CEO Mario Greco said it clarifies its strategy for central and eastern Europe, converting it into a top player in this high-growth region. With this move, Generali can fully benefit from its investment and focus on boosting its core insurance operations, while increasing competitiveness and profitability, Greco added.

As soon as the first stage of the transaction closes, Generali will have full management control of GPH, while PPF will have the right to appoint two of the JV’s eight board members. The buyer said it would use proceeds from a bond issue to cover the price for the initial stake.

Goldman Sachs International advised Generali in this transaction, which remains subject to clearance by the relevant authorities.

Reuters cited sources earlier as saying that Generali’s board was to consider the purchase of the stake not yet owned in the JV with PPF.

GPH is active in 14 countries in central and eastern Europe, with gross premiums of EUR4bn at the end of 2011, up from some EUR1bn in 2007. During this period, its client portfolio increased to 14m from four million. The region is Generali’s fourth market after Italy, France and Germany, it said.