MILAN, March 19 (Reuters) - Italy's government detailed

the conditions for clearing ION Group's 1.3 billion euro ($1.4

billion) acquisition of credit manager Prelios in an email sent

to the fintech group late last week, a person with knowledge of

the matter said.

Reuters was first to report the government's green light for

ION, which provides IT solutions for financial services and

operates globally through an intricate system of companies

controlled by Luxembourg-based holding firms.

ION has gained increased prominence in the home country of

its founder Andrea Pignataro, after investing some 6 billion

euros in Italy's financial sector in recent years.

ION's planned purchase of Milan-based Prelios from U.S.

fund Davidson Kempner needed government approval under Italian

rules allowing Rome to block foreign interest in assets deemed

of strategic national relevance.

After a preliminary green light, the approval process had

been held up, with banks unable to sign off on 630 million euros

of financing for the deal if the loan contracts were then to be

vetted by the government, because that created uncertainty over

the outcome of the transaction they were funding.

The government needs to have transparency on the conditions

under which ownership of Prelios could change and who its new

owners would be if the loan - which is secured against Prelios

shares - were not repaid.

Under the solution found, the Italian cabinet gave

conditional approval after examining the draft contracts for the

loans and for the merger of ION's acquisition vehicle X3G

Mergeco into Prelios, the source said.

ION must send over the contracts once they are signed

and, if they mirror the drafts the approval stands, the source

added.

Separately on Tuesday, a government document sent to

parliament and seen by Reuters showed that another ION vehicle,

Lavaredo UK Holding, will be merged into Prelios together with

X3G Mergeco.

As the acquisition vehicle employed in the leveraged buyout

transaction, X3G will formally take on the collateralised debt

used for the Prelios deal.

ION has also committed to preserving the organisational and

security measures Prelios currently has in place to protect

sensitive data, and to upgrade them as technology evolves.

The Prelios acquisition now needs approval from the Bank of

Italy, which has long been looking into ION's complex corporate

structure.

($1 = 0.9215 euros)