* Banco BPM says Cattolica underwent change of control
* Cattolica challenges view, arbitration seen as a possibility
* If successful, move eases M&A deals for Banco BPM - Citi
* Banco BPM considering merger with BPER - sources (Adds price paid by Cattolica in 2018)
MILAN, Dec 15 (Reuters) - Italy’s Banco BPM said it would end an insurance partnership with Cattolica by acquiring full control of their joint-ventures, in a move that may ease a mooted tie-up with BPER Banca.
Banco BPM said late on Tuesday it would exercise a call option to buy the 65% stakes held by Cattolica in their Vera Vita and Vera Assicurazione joint-ventures for an outlay of 335.7 million euros ($408 million).
If concluded, the transaction would have a negative impact on the bank’s core capital of between 5 and 60 basis points.
Three sources familiar with the matter had told Reuters last week that Banco BPM, Italy’s third-largest bank, was considering a tie-up with smaller rival BPER, whose top investor is insurer UnipolSAI.
The sources had said UnipolSAI eyed Banco BPM’s bigger distribution network, rooted in Milan’s wealthy Lombardy region, betting Banco BPM could dissolve the partnership with Cattolica.
Italy’s third-largest bank said in a statement a change of control at its business partner had prompted it to break up the JVs, a view challenged by Cattolica.
Italy’s biggest insurer Generali in June agreed to buy 24.4% of Cattolica, leapfrogging Warren Buffett’s Berkshire Hathaway to become the single largest investor in the Verona-based insurer.
Cattolica said in a note that the position taken by Banco BPM was “completely groundless” and it reserved the right to act to protect its interests.
Citi analysts said the parties could have to resort to an arbitration decision to settle the matter.
“In our view, the potential repurchase of insurance JVs, if successfully materializing/executed, could decrease deal complexity in a potential M&A transaction for Banco BPM, as it could create an opportunity for synergies generation on bancassurance,” Citi said.
Cattolica had paid 850 million euros for its stakes in the JVs back in 2018, when it struck a 15-year insurance partnership with Banco BPM. ($1 = 0.8226 euros) (Reporting by Andrea Mandala and Valentina Za; editing by Agnieszka Flak and Tom Brown)