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SAI to merge with Fondiaria

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FLORENCE, Italy--Societa Assicuratrice Industriale S.p.A. took control of Florence-based La Fondiaria Assicurazioni S.p.A. Thursday after it used its holding in Fondiaria to elect board members that would agree to a merger of the two insurers.

Under terms of the merger, Fondiaria shareholders will receive one SAI share for every four Fondiaria shares.

Based in Florence, the combined company's gross premiums will total around 7 billion euros ($6.45 billion). Of this, 75% is nonlife business.

If approved by regulators, the deal could be completed by the end of 2002. However, several of Fondiaria's minority shareholders are unhappy with the terms of the deal and are threatening unspecified court action.

SAI expects that the merger will lead to expense reductions.

The battle for control of Fondiaria started last July when SAI made a bid for a 29.9% stake of Fondiaria that was being disposed of by Milan, Italy-based Montedison S.p.A. Fondiaria tried to block SAI's takeover by alleging SAI was illegally acting in concert with other Fondiaria shareholders. However, courts and regulators ruled in favor of SAI.

Following the announcement, rating agency Standard & Poor's Corp. in New York revised its CreditWatch implications for Fondiaria's A- rating to "negative." S&P said the change was based on the necessity for SAI to exercise its option to buy 29.9% stake in Fondiaria in order for the merger to go ahead.

"S&P believes that--in the absence of external funding--the exercise of the said call options will put the newly created Fondiaria-SAI in a marginal capital position that is unlikely to support a secure rating," an S&P statement said.