Italy details terms for ION's Prelios deal, source says

MILAN (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)

(Reporting by Valentina Za; editing by Giselda Vagnoni and Susan Fenton)