March 5, 2020 / 2:32 PM / 3 months ago

Italy's security committee looks at M&A risks for UniCredit, Generali-sources

* Unicredit, Generali long at the centre of M&A speculation

* Focus on shareholders, possible changes, board composition

* Issue of who buys Italian debt crucial

* Industry regulators expected to be heard next week

By Giuseppe Fonte

MILAN, March 5 (Reuters) - An Italian parliamentary committee on security is looking into the ownership structure of the country’s top financial groups with a focus on possible changes at UniCredit and Generali that may dent their appetite for Rome’s public debt, three people involved told Reuters.

There are concerns that potential mergers with overseas rivals involving Italy’s top bank UniCredit and its largest insurer Generali would have implications for the refinancing of the country’s 2.4 trillion euro ($2.7 trillion) debt, committee members said on condition of anonymity.

Recommendations from the COPASIR security committee will be considered by the government but are not binding.

“We have started a fact-finding investigation on the shareholding structure of Italy’s main banks and insurers,” a committee member from the ruling coalition comprising the centre-left PD party and the 5-Star Movement told Reuters.

The three COPASIR MPs confirmed the focus was on UniCredit and Generali, two firms at the centre of merger speculation.

Both Generali and UniCredit declined to comment.

“We respect market players’ choices but we want to shed light on everything that concerns national interests and their protection,” COPASIR Chairman Raffaele Volpi told Reuters, without elaborating.

A second COPASIR member said the composition of the main groups’ board of directors would be scrutinised.

Sources have said UniCredit CEO Jean Pierre Mustier has looked into possible cross-border mergers for the bank, failing to clinch a deal due to political resistance.

He now says conditions are not in place for cross-border mergers and has ruled out any M&A for the bank for the duration of a new strategic plan through 2023 presented in December.

Steering Generali towards a cross-border deal that preserved its Italian roots is seen as a possible long-term goal for Italian billionaire Leonardo Del Vecchio, who last year became the single biggest investor in Mediobanca, which is turn Generali’s top shareholder.

Del Vecchio is also a 4.9% investor in Generali.

COPASIR plans to collect information through a number of hearings with officials from the Bank of Italy and insurance regulator IVASS expected to be heard next week, lawmakers said.

“We want to be on top of current developments. The issue of who buys our public debt is crucial. We want to make sure the ownership structure of our main banks and insurers, and any future changes, does not create problems,” one lawmaker said.

Generali held 59 billion euros in Italian government bonds in May 2019 and UniCredit 45 billion euros as of September 2019. It has been reducing its holdings after announcing in May that it would align its domestic exposure, in relative terms, to that of European rivals.

Italy sits on one of the world’s biggest public debts with gross refinancing needs of around 400 billion euros a year.

While all leading Italian banks have capped their domestic sovereign holdings, top lenders still play a key role in ensuring the Treasury can successfully hold bond auctions at times of intense market stress. ($1 = 0.8965 euros) (Additional reporting by Valentina Za and Gianluca Semeraro in Milan, writing by Valentina Za, editing by Elaine Hardcastle)

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