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Matteo Renzi, Italy’s prime minister, in an interview with the Financial Times this week, promised to do “revolutionary things”. None are more revolutionary than his pledge to “throw wide open” Italy’s door to foreign investors. It is an approach with consequences for Italy’s latest corporate hotspots from Telecom Italia to the fragmented banking industry.
In the prime minister’s office in Palazzo Chigi in Rome, Mr Renzi, the 39-year old former mayor of Florence, lambasted a stance shared by centre-right and centre-left Italian governments for decades.
“Italy is strange because there is a part of the political class that says ‘we don’t have any foreign investment’, and then when foreign investors come they say ‘you’re selling everything’, it is crazy, it is an attitude that strikes me as absurd,” he told the FT.
“I’m happier to see a big foreign investor arrive here than the usual Italian investor. Not because I’m unpatriotic but because for me the industrial project counts, not the passport,” he added.
Mr Renzi’s openness to international investors is a clean break with the past. Three years ago, under Silvio Berlusconi’s centre-right government, finance minister GiulioTremonti – in a bid to protect dairy group Parmalat from French buyer Lactalis – made an attempt to argue that milk was strategic.
Meanwhile, in 2007, AT&T dropped a takeover attempt for Telecom Italia citing political obstruction. Romano Prodi, prime minister for the centre-left government, said he hoped the telecoms group would keep its “Italianità”.
But all that has changed. The list of assets once considered strategic being picked up has lengthened as Italy’s economic slump has deepened.
Last Friday, Emirates-owned Etihad became the majority shareholder in Italy’s Alitalia, an airline that has cost Italian taxpayers an estimated €4bn since Mr Berlusconi in an electioneering gambit torpedoed a takeover bid from Air France in 2008 vowing to defend national pride.
China’s state grid agreed last month to buy 35 per cent of Italy’s state grid, arguably a more truly strategic asset than Alitalia. Chinese investors have recently bought energy group Ansaldo Energia from the state and are also looking at assets that state-controlled energy group Enel is considering selling, according to a senior government official.
In other deals, India’s Jindal is in talks to pick up Italy’s Lucchini Steel; ArcelorMittal is looking at another steel plant ILVA; while a Chinese automaker is in talks to move into an autoplant in Sicily vacated by Italian car group Fiat.
Bankers and business leaders admit these deals in industries previously considered strategic would have been unthinkable before the eurozone crisis. But Italy’s economic slump has brought state and private owners to the table. Data last week showed Italy dipped into recession for the third time since 2008 in the second quarter of this year.
For foreign investors, Italy is in the frame because prices are low and the country boasts strong brands, infrastructure and manufacturing expertise that, despite the toll a decade of zero nominal growth has taken, is hard to find in other places.
Geographically, investors from outside of Europe are also warming to Italy as a jumping off point for markets in Europe. Brilliance, for example, lacks a European assembly operation for their Jinbei minivans, which are based on Toyota technology, and the former Fiat plant in Sicily could fit the bill.
Government officials, defending their change of stance, argue this new laisser faire approach is grounded in experience of the private sector.
I’m happier to see a big foreign investor arrive here than the usual Italian investor. Not because I’m unpatriotic but because for me the industrial project counts, not the passport
Take the example, they say, of French group Kering’s takeover of luxury handbag makers Gucci and BottegaVeneta or US giant GE’s buyout of aerospace group Avio, as a reason why foreign investment should be welcomed. In both cases, funding for research increased and, crucially, Italian jobs stayed in Italy.
The benefit may be even bigger. In a startling statistic, recent research by Promoteia, an Italian think-tank, showed that 50,000 small and midsized companies bought out by foreigners performed 2 per cent better on every performance measure than 50,000 comparable companies in Italian hands.
For Telecom Italia and the banking sector, which have both been considered semi-strategic industries for Italy in the past despite their private ownership, the implication of Mr Renzi’s “welcome all comers” stance is clear.
An impoverished state has less room to interfere in Telecom Italia, which is embroiled in potential dealmaking by Telefónica and Vivendi regarding its Brazilian business, which could determine the future “Italianità’” of the national telecoms provider.
The other game is the banking sector. Bankers widely expect consolidation to begin after the conclusion of the autumn asset quality review and stress tests. Mr Renzi’s stance raises the prospect that long-mooted takeover target Monte dei Paschi di Siena, Italy’s third-largest bank by assets, could be in play for a foreign buyer.
The outstanding question of what will be left of corporate Italy once the open door policy to foreign investors takes its toll is one Mr Renzi still has to answer.
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