By Elena Vardon

Italy's Generali and the owner of France's Natixis are set to combine their asset management operations to create a European giant overlooking 1.9 trillion euros ($1.979 trillion) in assets.

The Italian insurer and French retail bank Groupe BPCE signed a preliminary deal underpinned by 15-year contracts to form a joint venture they will each own a 50% of.

Generali operates asset management activities through its Generali Investments Holding arm, which it bolstered through the acquisition of Connecticut-based Conning Holdings in last year and of U.S. private direct-lending investment firm MGG last week. Natixis Investment Managers has a network of fund boutiques including Harris Associates and Loomis Sayles in the U.S.

The joint venture will rank ninth in the world by assets under management and second in Europe after Amundi, they said in a statement on Tuesday. It will be the first European player by revenue based on a 4.1 billion-euro estimate taking 2023 figures. The firm will offer strategies mostly focused on fixed income and equities to clients across France, Italy and the U.S.--its key markets--and beyond.

The combined group will be headed by the chief executive of Generali's investment division Woody Bradford--who joined the Italian group through the Conning deal--while BPCE's CEO Nicolas Namias will take the chairman role. The deal is expected to close by early 2026, subject to approvals.

The news confirm recent media reports of a tie-up between the two groups as consolidation in the sector heats up. Last year, BNP Paribas announced the acquisition of AXA Investment Managers from the French insurer for 5.1 billion euros while Italy's Banco BPM launched a 1.6 billion euro takeover bid for Anima Holding. Talks of a potential transaction between German insurer Allianz and Amundi, the French asset manager which is majority owned by Credit Agricole, have also been reported.

"We are convinced that the asset management industry is undergoing rapid changes with scale and size being more critical than in the past...We have considered that a large and innovative partnership was the best option," BPCE's Namias said in a call with reporters.

The value of the Generali-Natixis joint venture, including its assets and activities, is estimated at 9.5 billion euros, the companies said. Pretax synergies should amount to 210 million euros over five years.

Under the deal, Generali has also committed 15 billion euros in seed capital to the affiliates of the new platform. Additionally, the companies agreed that BPCE will get preferred dividend rights in 2026 and 2027 while Generali will benefit from repayment tranches of a loan linked to its acquisition of MGG over the same period, they added.

"This transaction forms part of the European insurance industry deciding its strategic positioning in global asset management, arguably long overdue," Keefe, Bruyette & Woods analyst William Hawkins wrote in a note to clients. He added that the opportunity and synergies of scale from this deal will no doubt come with operational and management complexities.

Write to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

January 21, 2025 03:42 ET (08:42 GMT)

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