October 22, 2012 2:04 pm

Offers put Italy on interventionist track

Siemens’ tilt at Ansaldo Energia comes at a sensitive time

Bulgari is now controlled by French group LVMH

Siemens’ offer to buy power plant producer Ansaldo Energia for €1.3bn has ignited passions in Italy and helped re-establish an interventionist trend in industrial policy aimed at protecting national champions from foreign buyers.

Following the Siemens bid – which the German company has threatened to withdraw if talks do not conclude by early November – there has been calls from politicians on all sides, trade unions and editorial writers for Mario Monti’s technocratic government to intervene to keep Ansaldo Energia in domestic hands.

CDP shareholdings

CDP shareholdings

Consequently, Fondo Strategico Italiano, a state-backed private equity fund, said this month (Oct) that it would make a counter-offer to buy a “significant minority stake” in Ansaldo Energia together with three Italian industrial investors.

Finmeccanica, the partially state-owned defence and engineering company, is selling its 55 per cent stake in Ansaldo Energia to lower its crippling debt load. American private equity group First Reserve owns the rest of Ansaldo Energia and has not made its plans clear.

The Siemens offer for Ansaldo Energia has come at a sensitive time, with French companies in the past year having taken control of dairy group Parmalat, jeweller Bulgari and electricity producer Edison.

The Parmalat takeover remains controversial because, following a recent acquisition, the dairy company is accused of having acted in the interest of the Besnier family, which bought 83 per cent of the shares last year.

The Besniers have been criticised by minority shareholders for Parmalat’s acquisition of an American dairy owned by the family for more than €900m.

The family defended the purchase, saying it gave Parmalat exposure to the large US market.

Corrado Passera, the development minister and former chief executive of Intesa Sanpaolo bank, who is thought to be positioning himself for a political career after the general elections next spring, said this month (Oct): “What happened with Parmalat was not a good result. It’s normal that when a foreign company comes in they tend to take away everything and leave only that which can’t be carted off.”

The shift towards an interventionist and nationalist industrial policy is a return to the past. Though Italy still owns large holdings in oil group Eni, electricity producer Enel and Finmeccanica, the country had until recently been on a decade-long retreat from intervening in industry.

For 70 years, Italy’s industrial policy revolved round IRI, the state holding company set up in 1933 under the fascist government of Benito Mussolini and liquidated in 2000. IRI invested in myriad businesses from banks to highway operators, with investment decisions often dictated more by political clientelism than economics.

“For decades, national champions were mismanaged and ruined due to politics,” says Fabrizio Onida, an economics professor at Milan’s Bocconi University specialising in industrial policy. “All countries’ industrial policies are shaped by their past. Germany has the inflation of Weimar and Italy has IRI and the government’s inability to properly run the companies it controlled.”

In 2009 Italy allowed Cassa Depositi e Prestiti, a 162-year-old, state-owned financing agency that manages about €220bn in postal savings deposits, to invest directly in companies.

The finance ministry owns 70 per cent of CDP with the rest held by more than 60 banking foundations. Compared with the IRI, CDP’s investment decisions are more rigorous, with an eye to making a profit rather than propping up failing businesses for political gain.

Last year CDP created the €4bn Fondo Strategico to buy minority stakes in Italian companies considered of national interest because of the number of employees, size of revenue, the industry in which they operate or their general importance to the economy. Fondo Strategico has invested in several companies including €200m in one that is building a national broadband network.

“The financial crisis has made extraordinary interventions by governments more palatable, and people who six or seven years ago would have criticised a direct investment by the government now see it differently,” says Alberto Banfi, an economics professor at Milan’s Catholic University.

“This is a particular time and if the government can give some breathing room to the economy and key companies in non-traditional ways it makes sense to do that. Italy is certainly not the first to have the state invest directly in companies, and many of those people in other countries who call for a completely free market are the ones who put up the biggest obstacles.”

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