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Fiat Sells Toro Insurance GroupTo De Agostini

MILAN March 23, 2003; Dow Jones reports that Fiat SpA said Saturday that it will sell insurance unit Toro Assicurazioni SpA to unlisted publishing company De Agostini SpA for EUR2.4 billion as part of its effort to shore up its unprofitable car unit.

The sale of Italy's third largest insurer will slash EUR1.4 billion off Fiat's net debt, which at the end of last year stood at EUR3.8 billion, and allow the company to book a capital gain of EUR350 million, Fiat said.

De Agostini, which in addition to publishing operations controls Italy's national lottery company, outbid Toro's domestic rival Unipol Assicurazioni SpA (I.UNI) and French competitor Groupama SA in order to enter the insurance sector.

"The sale of Toro is a significant sacrifice for us, but it's necessary to reduce our debt and sustain our development," Giuseppe Morchio, Fiat's fourth chief executive in less than a year, said in a statement.

After months of deliberating under pressure from its creditors, Fiat recently said it would sell what many regard as the only jewels left in the sprawling, yet unprofitable, conglomerate in order to revitalize its largest unit, Fiat Auto.

The 104-year-old car company, the hallmark of large Italian industry, has seen its market share decline precipitously over the past year and a half and has lost around EUR100 million a month since October 2001.

General Motors Corp. owns 20% of Fiat Auto and under a "put" option can be forced to acquire the rest of it beginning next year.

With its stock worth 63% less than it was a year ago and in absence of an agreement from GM to contribute to a capital increase for Fiat Auto, Fiat is seeking to raise as much as EUR4 billion through asset disposals by July.

Next on the list is the sale of Fiat Avio, an aeronautics division for which U.S. private equity company Carlyle Group LP is understood to be the leading bidder in a deal estimated around EUR1.6 billion.

As part of the Toro deal, De Agostini will gain a 6.6% stake in Italy's fourth-largest lender, Capitalia SpA , whose investment banking division, MCC, advised Fiat on the sale.

Under the advisory terms, Capitalia can over the next three years compel De Agostini to sell the stake to a buyer of the bank's choice for a 25% premium on market prices.

That agreement is part of an effort by Capitalia Chairman Cesare Geronzi to stabilize the bank's key shareholder base after a formal pact between investors who controlled 24% of Capitalia expired last December.