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February 11, 2013 7:27 pm
BlackRock was the seller of a large stake in Italian oil services group Saipem in a deal that has attracted scrutiny from Italian and British regulators, according to people familiar with the matter.
Investigators are looking into whether there was market abuse surrounding the share sale ahead of a profit warning from Saipem, which is controlled by state-owned Eni.
On January 28, Bank of America Merrill Lynch sold a 2.3 per cent stake, about €315m worth of shares, in Saipem on behalf of BlackRock, the world’s biggest fund manager, the people familiar with the deal told the Financial Times.
Less than 24 hours later, a warning on profits by Saipem wiped nearly a third off the company’s market capitalisation.
The warning generated anger among the broad pool of institutional investors who took up shares in the placement, according to brokers. Previous management of Saipem had reassured in October that the group would meet its 2012 targets.
Massachusetts Financial Services, a US investment fund with $338.2bn under management, bought a 2 per cent stake in Saipem just hours before the profit warning, according to a document published on Consob’s website.
“I’ve never seen anything quite like this,” said one banker who was familiar with the transaction but was not directly involved, referring to the timing between the share sale and Saipem’s profit warning.
The sale was described as a “clean up” trade, deals that are typically considered more attractive to investors because it means the institution will not be putting any more pressure on the share price through another sale.
It underscores a key risk for banks undertaking accelerated book build transactions, where banks sell a stake in a company on behalf of an institution.
“The problem is that we get into these situations – it’s legally and structurally impossible for us to do due diligence,” said one banker. He added that bankers were not typically given access to management in such deals.
BlackRock declined to comment. It is not under any obligation to disclose any stake it holds in Saipem under 5 per cent. In 2012, the fund manager notified Italian regulator Consob that it would no longer report its holdings in Saipem, making it difficult to know just how much it holds.
Consob declined to comment on who it was investigating but said it would “look into every operation and go into every detail of the story” from the transaction to the profit warning.
Saipem’s profit warning was the latest in a string bad news as the company dealt with allegations of bribery related to contracts in Algeria. It has denied any wrong doing.
Bank of America Merrill Lynch also declined to comment.
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