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France’s BPCE combined its investment arm Natixis with Italian insurer Generali because it could not be a “global champion”, the bank’s chief executive said, as he announced the latest consolidation in the European asset management sector.
“I know perfectly well that Natixis as a standalone entity can’t be a global champion in the long term. But that’s the case for almost all the actors of asset management. That’s why there’s a movement of consolidation,” said Nicolas Namias on Tuesday.
Under the terms of the tie-up, BPCE and Generali investments will combine their operations in a 50-50 joint venture. The deal will create the second largest asset manager by assets under management, with €1.9bn, and the largest by revenue.
Namias’s comments underline the challenges for asset managers to compete with large US rivals and come as European banks, insurers and independent groups are evaluating their commitment to asset management, weighing up whether to double down, partner with others in pursuit of scale or withdraw from the sector.
Scale had become more important in the sector as asset managers needed to be able to draw on larger pools of capital, Namias said.
Natixis will contribute about €1.3tn in AUM to the joint-venture while Generali will contribute about half of that amount, said Generali chief executive Philippe Donnet. The insurer has committed to providing €15bn in “seed capital” for new investments.
The head of Generali’s investment division Woody Bradford will become the new chief executive of the company and Namias will be chair.
Namias said the decision to form a joint venture was taken instead of a traditional merger and acquisition because both businesses wanted to maintain control over the operation.
“Either we do nothing or we are innovative with this invention of co-control,” he said.
Talks between the two businesses were first reported by the Financial Times in November. Last year, BPCE attempted to combine Natixis with French insurer Axa’s asset management division but lost out to rival French lender BNP Paribas.
At the time of the deal, Axa chief executive Thomas Buberl said: “When you look at the consolidation of the industry, [Axa Investment Managers] is certainly not big enough.”
The joint venture comes after talks between Europe’s largest asset manager Amundi and German insurer Allianz were put on pause in December, amid disagreements over how best to structure a potential transaction.
In the Natixis and Generali deal, the companies will retain ownership of their respective assets, which will be managed by a newly created Dutch entity that they will co-own for 15 years.
The partnership, however, faces hurdles in Italy where Giorgia Meloni’s rightwing government has raised doubts about the consequences of the deal for domestic savings, which are key to the refinancing of the country’s public debt.
Generali is the single largest investor in Italian public debt and Rome must greenlight the deal under its so-called golden powers, which give it a say over any deal considered strategic for the country.
On Monday, board members representing minority shareholder Francesco Gaetano Caltagirone, voted against the deal. But Donnet said the terms had been approved by a “large majority” and that the idea that Italian savings would move abroad was “a joke”.
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