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The owners of France’s Natixis Investment Managers and Italian insurer Generali have announced the end of their agreement to create a European asset management champion.
The companies said on Thursday that they had “jointly taken the decision to terminate negotiations”.
“The work conducted together in recent months confirmed the merits and industrial value of a partnership,” they added.
Earlier on Thursday the Financial Times reported that the companies would abandon their plan to create a 50-50 joint venture.
The agreement, which would have brought together two of the biggest European names in the sector, encountered opposition from the Italian government.
Rome holds special powers to approve foreign investments in national strategic assets and would have needed to approve the tie-up.
The deal was conceived last year and announced in January, part of a wave of consolidation across the asset management industry as European groups looked to scale up to counter declining margins and boost investments in technology.
Generali’s role as one of the main holders of Italian sovereign debt exposed the joint venture and its governance to criticism from several quarters of Italy’s business and political elites, with Rome raising financial stability concerns.
Top Generali shareholders, including the billionaire Del Vecchio holding company Delfin and Roman construction group Caltagirone, also opposed the deal, adding further fuel to their tumultuous relationship with chief executive Philippe Donnet, who had masterminded the tie-up.
The shareholders also recently consolidated their influence over the insurer by backing Monte dei Paschi di Siena’s takeover of Mediobanca, Generali’s largest shareholder.
In the year since the joint venture was announced, negotiations with the Italian government failed to adequately advance, people familiar with discussions said.
Donnet did not want to prolong the talks and place further strain on his relationship with the insurer’s top shareholders and the Italian government, they added.
Earlier this year Generali and Natixis scrapped the break-up fees originally envisaged under their agreement, signalling the deal could fall apart.
Natixis has €1.3tn in assets under management and operates a multi-boutique model, owning majority stakes in 15 active managers that continue to be run by their original teams. Generali had €875bn in assets under management at the end of September.
One person close to the negotiations said the situation left Generali exposed in the asset management business because they need greater scale, domestic combinations are unlikely and the government has signalled the insurer is a strategic player.
Natixis, meanwhile, may begin to look at combining with other groups in a bid to expand, the person added.