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LONDON-Assurances Generales de France's days as an independent entity may be numbered in the face of a hostile takeover bid by Italy's Assicurazioni Generali S.p.A.

Although the success of Generali's unsolicited bid is uncertain-especially because the AGF board rejected it last week-observers expect AGF will be taken over or ally with another bank or insurer.

Generali's 55 billion French franc ($9.35 billion) offer comes amid a series of bids and counterbids by AGF and other entities in the last month for French financial/industrial conglomerate Worms & Cie.

The takeover offer for AGF did not come as a great surprise to stock analysts.

Michael Lindsay, insurance analyst at Lehman Brothers in London, had earlier this month predicted an attempted takeover of AGF, though he didn't offer a precise date (BI, Oct. 13). "Perhaps we should have been more aggressive," he mused last week.

Whatever the outcome, AGF's independence is likely to be over.

"AGF will lose its independence whatever happens. Either Generali wins or AGF finds help (from a white knight), but this will have strings attached," said Ronald Andreasson, insurance analyst at London stockbrokers Barclay de Zoete Wedd. If

Generali succeeds in acquiring AGF, the Italian insurer will achieve its long-stated ambition of becoming a significant player in the French market as well as the No. 1 insurance company in Spain.

"This would cause a very big change to the Spanish market," Mr. Andreasson said.

Generali launched its bid for AGF during the weekend of Oct. 11-12 as a result of the Oct. 6 bid by AGF and Italy's Ifil for Paris-based Worms & Cie., a spokesman for Generali confirmed. Ifil is the holding company for the interests of the Agnelli family, Italy's leading industrial family, which controls the Fiat automobile company.

The AGF/Ifil bid for Worms & Cie. itself was made in response to a hostile offer by French industrialist Francois Pinault for Worms & Cie.

If the AGF bid were to succeed, AGF would gain control of Worms subsidiary Athena Assurances, one of France's 20 largest insurers. An AGF spokesman in Paris said its bid for the Worms conglomerate is still on the table, despite Generali's move.

AGF also is interested in acquiring troubled French insurer Groupe des Assurances de Paris when the French government decides to privatize it. The insurer's push for new acquisitions triggered a feeling in the market that AGF itself might be vulnerable.

"When you look at all of the companies in this bidding, AGF is the weakest player," said Ugo Pastori, insurance analyst at Robert Fleming Securities in London.

"There are just three companies on offer in the French market, AGF, Athena and GAN," said Mr. Lindsay. "Two big insurers want to be part of the French market. So Generali probably felt it had to make a move."

Generali's bid for AGF includes offering 300 French francs ($51) for each AGF share and 305 French francs ($52) for AGF convertible bonds.

The Generali offer also would acquire shares to be issued by AGF to finance its effort to gain control of Athena, Generali statement said.

The board of AGF last week rejected the offer as "unacceptable" and too low.

A Generali spokesman said the offer is not too low because it offered a premium and is in cash.

Even before AGF responded, some analysts speculated Generali would have to make a second offer to succeed.

"I don't think they (Generali) will get it at this price," said Mr. Pastori. But he said he thinks Generali ultimately will prevail.

"I'm pretty confident that Generali will win in the end. Another company would be crazy to start a bidding war with Generali," he said.

Two other companies seen as possible bidders or white knights for AGF are Germany's Allianz Versicherungs A.G. and the U.K.'s Commercial Union P.L.C.

Allianz has a small operation in France, while Commercial Union controls Victoire Assurances.

"The company always has been interested in GAN and will do a due diligence, but we were more selective with AGF since the French government's attitude is not very favorable to hostile takeover bids," an Allianz spokesman said.

A Commercial Union spokesman was not available for comment.

AGF has appointed three investment banks as advisers in its defense, an AGF spokesman confirmed. They are Goldman Sachs, which leads the team, Credit Suisse First Boston and Societe Generale.

Generali recently has been expected to make a substantial acquisition. France was seen as a likely target because of Generali's failed attempt to take over mutual insurer Companie du Midi in 1989; the try was thwarted by a rival offer from AXA S.A. Last year, AXA bought out Generali's remaining holding in Midi.

The Generali spokesman confirmed France is a principal target. "It is a strategic market, like Spain and Austria. In these markets you need to be of a certain size," he said.

Generali currently has between 3% and 3.5% of the French market. In Italy, it is the largest insurer, though only 30% of its earnings comes from the Italian market. The majority of its earnings is from foreign interests, including: 21% from France, and 12% from Austria. Over the past year it has bought control of Tel Aviv-based Migdal Insurance Co., which controls 24% of the Israeli market, and created a new company in Brazil, Sudameris Generali.

In 1996, Generali registered a net profit of 519.7 billion lire ($304.3 million), a 7.6% increase from the prior year. Total gross premiums written were 11,394 billion lire ($6.67 billion), an 8.6% increase from the prior year.

If the bid for AGF is successful, Generali would gain an 11% market share in France and become the second-largest insurer in the French market behind AXA-UAP, which controls 14% of the French market.

In Spain, the merged group would control 10% of the market. Generali, with a 5.7% stake, is the leading shareholder in Spain's Banco Central Hispanoamericanao, which controls three insurers: Vitalicio Seguros, Cia. de Seguros La Estrella and Cia. de Seguros Vasco Navarra.

AGF also has a presence in Spain, controlling AGF Union Fenix, the result of a merger between AGF Espana and La Union y El Fenix Espanol. AGF bought UFE from Banco Espanol de Credito after the Spanish insurance authorities intervened into Banesto following a corruption scandal.

The combination of Generali and AGF interest would become the largest Spanish insurer, analysts predict, though the Generali spokesman said it would be just equal in size to the Spanish market's current leader, Mapfre Mutualidad.

Generali Chairman Antoine Bernheim and Mr. Pinault-who is AGF's rival in bidding for Worms & Cie.-met just days before Generali's bid.

This prompted rumors in the French and Italian stock markets and press that the two had reached an agreement on bidding strategies for AGF and Worms & Cie. The Generali spokesman confirmed the meeting took place but would not comment further.

Generali's Mr. Bernheim is regarded as both the driving force behind the bid for AGF and the glue that keeps together the various Italian companies participating directly or indirectly in the bidding for the French insurer.

"He is a real strategic thinker," said Mr. Pastori of Robert Fleming Securities.

Mr. Bernheim, who was born in France, became Generali's chairman two years ago. Prior to that, he was a senior partner at investment bank Lazard Freres in Paris. Lazard is advising Generali on the bid and also holds 6% of the Italian insurer's shares.

In addition, Mr. Bernheim is deputy chairman of Milan-based commercial bank, Mediobanca, which has cross-shareholdings in most of Italy's major companies and has been at the center of most important mergers and acquisitions in Italy for many decades. Mediobanca owns 5.9% of Generali, while Generali owns 12.5% of Mediobanca.

The Generali bid also sets two sides of the Agnelli family against each other. Generali owns 2.3% of the Fiat auto group, whose chief executive is Cesare Romiti, who took over after the retirement of Giovanni Agnelli.

The Ifil holding company, which teamed with AGF to bid for Worms & Cie., is headed by Giovanni Agnelli's brother, Umberto.

But analysts are dismissing notions of a fight in the Agnelli family.

"All those rumors are a bit of a fiction. I think Ifil bid this time without reference to Fiat. Sometimes Fiat, Ifil, Generali and Mediobanca have bid together, but (this time) Ifil started things on its own," Mr. Pastori said.

The three Italian financial institutions-Generali, Mediobanca and Ifil-belong to the so-called "sallotto buono," or smart parlor, of Italian high finance.

Mr. Pastori thinks the only way for AGF to avoid an acquisition would be to create a French group or perhaps some form of management buyout. But this could be difficult, he added. "I don't see French banks interested. They are interested in creating shareholder value now," he said.

Allianz as a potential white knight could also face a problem.

AGF owns 33% of German insurer Aachener Munchener Beteiligung, while AMB owns 5% of AGF. Should Allianz acquire the AMB shares, it could face problems with German authorities that might see that move as anti-competitive, one analyst said.

"So I don't think that Allianz will be making a counter-bid. Or of it did, it could sell off AMB later to finance it," said Mr. Andreasson of BZW.

The entrance of a U.S. company into the bidding game, meanwhile, is not a strong possibility, analysts say.

"If a U.S. company bought AGF, it would not create any synergy. It would not be able to transfer business into AGF. The only logic would be if the acquisition gave a high return on equity. But the European market is not like that at all," said Mr. Andreasson