MILAN, November 23: Italian insurer Assicurazioni Generali said on Saturday it would not raise its bid for France's AGF, until French authorities give the go-ahead to its original offer.

In response to a counter-offer from Germany's Allianz earlier this week, Generali's board executives decided to bide their time and wait for a thumbs up to their 300-Franc per share offer before making a next move. "The AGF issue was discussed in today's board meeting but we are not going to raise our offer before obtaining the green light from the French government," said a Generali official. Analysts praised the decision as a wise move and said Generali was playing for time to mull its options which could include striking a deal with Allianz. "They've done something very sensible and they are leaving their options open possibly to do a deal with Allianz," Tom Bennett, insurance analyst at Paribas in London, said.

"Generali is a big, strong company but Allianz is bigger so if there's going to be an all-out war, there's no doubt Allianz will win," he said.

Allianz, Germany's biggest insurance company, countered Generali's October bid with a friendly offer of 320 Francs a share in an effort to create one of the world's biggest insurance groups. Analysts had expected Generali to strike back with an offer of at least 350 Francs a share after its board meeting on Saturday.

Instead, the board issued a statement saying they had decided to propose a capital increase of up to 300 million shares with a nominal value of 600 billion Lire to fund future acquisitions.

"Generali wants to strengthen its position in Europe through acquisitions and AGF is one of the options," the Generali spokesman said.

The board also said it would ask shareholders at an extraordinary meeting to be held on January 10 for the right to issue up to three trillion Lire of debenture loans. The absence of an immediate counter-bid from Generali could weigh on AGF's shares next week after they rocketed more than 11 per cent on Friday, analysts said. Allianz and Generali shares are expected to trade sideways until the Italian insurer announces its next move.

The Generali spokesman said he expected French authorities to make a decision on the group's bid as early as next week, although officially the government has three months to authorise it. Generali's board is scheduled to meet on December 5. If the Italian insurer does decide to raise its bid into the region of 350 Francs per share, analysts said Allianz would fight back with a knock-out offer. One very feasible option, however, would be for Generali to make a compromise with Allianz through third parties. In return for AGF, Allianz could agree to sell its German unit AMB to Generali, for example. However, some analysts said Allianz was the favoured candidate in every way and would not need to strike a deal.

"All the cards are stacked in favour of Allianz with its stronger position and the fact that it is trusted by investors and analysts," Tim Dawson, insurance analyst at BZW in London, said.

"Generali is going to suffer from its secretiveness". But a failure to secure AGF will not mean the end for Generali, analysts said. "Generali could go for French insurer GAN or German unit AMB which will be up for sale," Dawson said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.