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Generali, Natixis owner signed preliminary accord

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Deal aimed to create jointly owned European asset manager

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Rome opposes deal, keen to keep domestic savings in Italy

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Changes in Generali's shareholder base could affect

management

By Gianluca Semeraro, Valentina Za, Giuseppe Fonte and

Mathieu Rosemain

MILAN/ROME/PARIS, Oct 28 (Reuters) - Italy's biggest

insurer Generali and French banking group BPCE are

likely to abandon plans to merge their asset management

businesses by letting a year-end deadline lapse without a

binding agreement, three sources said.

The sources, briefed on the process, spoke on condition of

anonymity because negotiations are private.

Generali and BPCE agreed in September to finalise a deal to

combine Generali Investments Holding and Natixis Investment

Managers by December 31, after amending terms to remove a 50

million euro ($58 million) break-up fee.

While talks are continuing, the sources said the most likely

scenario was that the deadline would pass without a deal, amid

Italian government opposition and uncertainty over potential

management changes at Generali.

Generali declined to comment. A BPCE representative said:

"We have given ourselves until the end of the year to reach an

agreement. The teams are working towards this goal and relations

between BPCE and Generali are good."

ROME, TWO MAJOR GENERALI INVESTORS OPPOSE DEAL

The deal is opposed by Italy's government and two major

Generali investors - Delfin, the Del Vecchio family's holding

company, and construction tycoon Francesco Gaetano Caltagirone -

both of whom recently consolidated influence over the insurer.

The two investors backed a takeover of Mediobanca,

Generali's biggest shareholder with a 13% stake.

Mediobanca is now owned by Monte dei Paschi di Siena (MPS)

, where the two families are major shareholders and

where the Italian state, which rescued MPS in 2017 and then

reprivatised it, still holds 4.9%.

Mediobanca is one of Generali's advisers on the deal.

MPS on Tuesday appointed new top managers at Mediobanca,

naming veteran fund manager Alessandro Melzi d'Eril as CEO and

former JPMorgan banker Vittorio Grilli as chair.

The shake-up at Mediobanca may have implications for

Generali, whose board - led by CEO Philippe Donnet and Chairman

Andrea Sironi - was largely appointed by Mediobanca in April.

Donnet, CEO since 2016, has led Generali with Mediobanca's

backing. At the time of his reappointment, Caltagirone said he

had no alternative CEO to propose but could still block what he

called a "wretched" asset management deal.

Mediobanca ultimately secured 10 of 13 board seats at

Generali.

Two of the sources and a fourth person close to the matter

said Donnet was expected to oversee an orderly transition but

may not complete his mandate, which runs until 2028.

($1 = 0.8575 euros)

(Editing by Mark Potter)