By Sergio Goncalves and Pamela Barbaglia
LISBON/LONDON, July 9 (Reuters) - Italy's Generali has entered exclusive negotiations to buy Portuguese insurer Tranquilidade in a deal to boost its presence in Portugal, two sources familiar with the matter said.
Generali outbid Spanish insurance firm Grupo Catalana Occidente and was in final talks to buy the Lisbon-based company, the sources told Reuters, speaking on condition of anonymity.
Generali, Europe's third-biggest insurer, has a 5% market share in Portugal. It plans to use Tranquilidade, whose business in Portugal is second only to Fosun-backed Fidelidade, as a platform to boost its client base in the country.
The deal, which values the 148-year-old insurer at between 550 million and 600 million euros ($616 million-$672 million), was expected to be signed next week, one of the sources said.
Generali and Grupo Catalana Occidente declined to comment.
Tranquilidade is controlled by U.S. investment fund Apollo which bought it in 2015 from the remnant of Banco Espirito Santo in a deal worth about 200 million euros.
Apollo kicked off an auction process this year that drew interest from a series of industry players including Germany's Allianz, Belgium's Ageas and Spain's Mapfre.
But only Generali and Catalana made it to the final stages of the auction which was led by Societe Generale, Jefferies and Arcano Partners, the sources said.
Generali's bid emerged as the most competitive as the Trieste-based firm has been reviewing its presence in Portugal since 2017. It initially hired banks to look into a possible exit but subsequently decided to focus on acquisitions to expand its presence and boost revenue generation.
Tranquilidade was part of the troubled web of businesses of the Espirito Santo family, who had backed the firm for decades.
But the 2014 collapse of Banco Espirito Santo and its subsequent 4.9 billion bailout led to the creation of Novo Banco, which swallowed the lender's healthy operations including Tranquilidade while its toxic assets were shifted to a bad bank.
$1 = 0.8924 euros Reporting by Sergio Goncalves in Lisbon and Pamela Barbaglia in London; Additional reporting by Gianluca Semeraro in Milan and Emma Pinedo Gonzalez in Madrid Editing by Alexander Smith and Edmund Blair