(Update to show sale of Mediobanca, Generali stakes)
MILAN (Thomson Financial) - Unicredito Italiano SpA and Capitalia SpA said their respective boards have approved an all-share merger which will create the euro zone's biggest bank in terms of market capitalization.
In a joint statement, the banks said Capitalia will be merged into Unicredit.
Unicredit will offer 1.12 of new Unicredit shares for each Capitalia share, a share swap ratio that recognizes a premium of 23.5-24.4 pct to Capitalia shareholders.
The banks said the merger will be earnings accretive for Unicredit shareholders as of 2009 and for Capitalia shareholders immediately.
The operation will generate gross synergies of 1.2 bln eur by 2010, 68 pct of which will be through cost cutting measures. Net synergies will be around 800 mln eur.
The merger will involve integration costs of 1.1 bln eur which will be booked in the period 2007-2008.
The two banks said that earnings per share of the new merged entity will grow an average of 17 pct a year in the period 2007-2009 compared to the 14 pct growth estimated for the two banks pre-merger.
The dividend per share ratio will grow steadily over the next few years, the banks said.
They said the Core Tier 1 capital ratio will reach 6.8 pct by 2008.
The banks said they intend to lower their stake in Mediobanca SpA to 9.39 pct, from around 19 pct at the moment, by the end of 2007, giving Mediobanca the right to sell the remaining stake among shareholders of the Mediobanca pact.
Unicredit also said it intends to sell the stake in Assicurazioni Generali relating to the exchangeable bond Unicredit has and which expires in 2008.
The banks said shareholder meetings to approve the merger will be convened in July or early August.
Subject to regulatory approval, the operation should be concluded by the beginning of the final quarter of the year, the two banks said.
The new bank, which will have over 5,000 branches in Italy, will generate over half its revenues outside Italy. The bank will be organised on a divisional basis with retail banking accounting for about 37 pct of revenues.
As regards corporate governance, the banks said they will not adapt a dual-management model comprising a management and supervisory committee.
After the merger is approved, four Capitalia board members will be co-opted onto the Unicredit board.
Capitalia said it will propose the names of current Capitalia chairman Cesare Geronzi as well as Salvatore Ligresti, Donato Fontanesi and Salvatore Mancuso.
At the same time 4 Unicredit board members will be co-opted onto the Capitalia board.
The deputy chairman of the new bank will be Cesare Geronzi who will also be chairman of the executive committee and will be in charge of the bank's strategic shareholdings in Mediobanca SpA, Assicurazioni Generali SpA, RCS Media Group SpA and Pirelli & C SpA.
If Geronzi accepts a management position elsewhere he will resign from his positions at the new bank and will be replaced as deputy chairman by Berardino Libonati, the banks said.
After the merger is effective the leading shareholders of the new bank will be Fondazione Cassa di Risparmio Verona, Vicenza, Belluno e Ancona (3.90 pct), Munich Re (3.70 pct), Fondazione Cassa di Risparmio di Torino (3.69 pct), Carimonte Holding (3.34 pct), Gruppo Allianz (2.42 pct), ABN Amro (1.88 pct), and Fondazione Cassa di Risparmio di Roma (1.10 pct).
Capitalia CEO Matteo Arpe will resign as of May 31. stephen.jewkes@thomson.com tfn-mil-sj/hjp/tfn-mil-sj/hjp/tfn-mil-sj/hjp COPYRIGHT Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.