Shares in Generali, the world's third largest insurance firm, fell over three per cent today with the firm's takeover by lender Intesa Sanpaolo understood to be further away than previously anticipated.
Read more: Intesa Sanpaolo examining Generali takeover
The transaction would be one of the largest ever in the insurance sector and City A.M. understands it was of a sufficient size to spook one of Intesa Sanpaolo's leading shareholders, Turin's city-state investment fund.
The fund was particularly concerned at the level of risk the combined company would take on. With combined assets of over €100bn, only a small movement in bond prices could lead to a considerable increase in the amount of capital the firm had to put to one side under financial regulations.
Sources added Intesa Sanpaolo hand was forced on Tuesday evening. Italian financial regulators had summoned the lender and Generali to see them and requested that Intesa Sanpaolo make public the fact it was considering a number of investment opportunities.
"These opportunities, including possible industrial combinations with Generali, are currently being examined by the bank’s management," Intesa Sanpaolo revealed in its statement.
Against the backdrop of no further news and concerns that the deal could be scuppered by key investors of Intesa Sanpaolo, Generali shares have no given up some of the ground gained last week on the run up to the announcement last Tuesday.
As reports surfaced that Generali was to be the target of an Intesa Sanpaolo takeover bid, the insurer had taken a pre-emptive strike against a move from Intesa by buying 3.01 per cent shareholding in the Italian lender earlier this week.
According to Italy's cross-shareholding regulations, a company cannot hold more than three per cent of another entity's voting rights if the latter already has a stake of more than three per cent in that company.
Therefore, Intesa can buy more shares in Generali but its voting rights would be capped at three per cent. Critically, such a cap does not apply if Intesa were to increase its hold to 60 per cent.