UniCredit, Banco Santander to Merge Asset Management Units

MILAN-- UniCredit SpA and Banco Santander SA have reached preliminary agreement on a deal to merge their asset management units and combine all activities of the two money managers, the Italian lender said.

The merger will see the creation of a holding company retaining UniCredit's Pioneer Investments brand, which will be 50%-owned by UniCredit and 50%-owned by private-equity firms Warburg Pincus LLC and General Atlantic LLC. The two private-equity firms together currently own 50% of Santander Asset Management.

The newly created holding company will own stakes in two units. One will comprise Pioneer's U.S. business, which the holding company will control completely. The other unit will consist of Pioneer and Santander Asset Management's non-U.S. businesses, of which the holding company will own two-thirds. The remaining third will be owned by Santander.

The deal includes a 1.1 billion euro ($1.18 billion) cash payment to UniCredit from Santander and the two private-equity funds, a person familiar with the matter said.

The company resulting from the merger will have an enterprise value of around EUR5.5 billion and will have EUR400 billion in assets under management.

According to a person familiar with the matter, Santander won't be a shareholder of the main holding company to avoid a rejection of the deal by U.S. regulators following the Spanish bank's failure of the U.S. Federal Reserve's stress tests last year.

The person said that following the failure of the test, U.S. regulators may haven't permitted a growth of Santander's overall U.S. business. If Santander owned a stake in the top holding company, it would have become a shareholder in Pioneer's U.S. business.

"Santander is currently reinforcing the group's structure in the United States with the creation of a holding company, with its own management team, to which all the group's businesses in the country will report," a spokesperson said. "With all these changes under way, including strengthening the management team and improving corporate governance, the group doesn't think this is the time to add new businesses to the mix in the U.S."

The Fed, which oversees banks in the U.S., didn't immediately reply to a request for comment. UniCredit declined to comment.

UniCredit's estimates that the deal will add around 25 basis points to its common equity Tier 1 ratio, which is a regulatory measure of banks' capital strength.

Write to Giovanni Legorano at [e-mail]

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