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Singer's Italian fiat

Making sense of the typical Italian merger is a bit like trying to decipher an Alfa Romeo wiring diagram.

But hedge fund manager Gordon Singer insists he understands perfectly well what's going on in the convoluted takeover of Italian insurer La Fondiaria -- and he's agitato about it.

Singer's is no idle irritation, either. The 28-year-old American, who works out of London for his father Paul's New York-based $1.9 billion hedge fund, Elliott Associates, last year galvanized investors to block Telecom Italia's attempt to buy back its shares at a big discount; he's now suing the company for damages. And two years ago, when Italian bank Sanpaolo IMI acquired a major stake in Banco di Napoli, Singer complained loudly that some shareholders were getting short shrift. Italy's M&A regulator, Consob, forced Sanpaolo to buy all of Napoli's outstanding shares.

But the E812 million ($705 million) La Fondiaria deal, says Singer, is "the most sordid and shocking example of shareholder abuse I've been involved with in Italy." Early last month Milan-based Interbanca and Milan financier and sometime corporate raider Francesco Micheli teamed up with J.P. Morgan Italia to buy a 22 percent stake in La Fondiaria from Montedison, the Fiat-controlled energy conglomerate. Then the three investors exchanged puts and calls on their stake with one of the insurer's rivals, Società Assicuratrice Industriale.

Well, SAI, as it happens, is an ally of Milan merchant bank Mediobanca, which already owns almost 14 percent of La Fondiaria. Thus, Singer contends, SAI and Mediobanca are working in concert to control La Fondiaria; their combined holdings, he says, exceed 30 percent -- the level at which an acquirer is forced to bid for all of a company's shares under Italian law.

"The whole thing is a poorly veiled attempt to win control of La Fondiaria and flout Italy's takeover rules," says Singer. "The puts and calls, which allow SAI to eventually get the stakes, are the smoking guns." For their part, the three investors contend that there was no collusion with SAI.

If Consob doesn't back him up on this, Singer warns, he plans to sue.