Montedison Breakup Possible As Fiat-Led Group Makes Bid

09 July 2001 00:00  [Source: ICB Americas]

Montedison, the Italian energy and chemicals conglomerate, looked close to being broken up last week after a consortium, headed by automobile maker Fiat, claimed to have won 52 percent control of the company.

Fiat, together with the French state-owned electricity producer Electricite de France (EdF), financier Romain Zaleski, Deutsche Bank and a number of Italian banks, are launching a á5.5 billion ($4.7 billion) bid for the remaining 48 percent of Montedison shares.

The takeover, which is targeted at Montedison's Edison and Sondel power subsidiaries, is being made through Italenergia, a holding company in which Fiat has a 38 percent share and EdF 18 percent. Fiat has effective control of Italenergia because EdF is pooling its shares with those of the car manufacturer.

"We have no interest at all in getting back into chemicals," says Gualberto Ranieri, a spokesman for Fiat, which was involved in chemicals through a stake in Snia, the chemicals and fibers group. It sold its shareholding in Snia in a public share offer two years ago.

Nonetheless, Italenergia is promising to carry out a strategic review on the future of Montedison's chemicals and related businesses once it achieves full ownership of the company.

The main chemical operations of Montedison, which had total sales of á14.3 billion last year and an operating profit of á1.8 billion, are Ausimont, a fluorinated chemicals and peroxides producer; Antibioticos, an antibiotics intermediates and bulk actives manufacturer; and Tecnimont, the chemical engineering company.

Ausimont had sales of á597 million last year with an operating profit of á165 million. Montedison restructured its ownership last December by transferring it to Agora SpA, in which Montedison as an 80 percent stake and Longside International, an equity fund company, 20 percent.

Antibioticos had sales last year of á285 million with an operating profit of á16 million, while Tecnimont had sales of á673 million and an operating profit of á45 million.

Montedison also has a group of four agribusiness operations in each of which it has a 54 percent stake and which were set up as independent entities through stock market flotations last month. These include Cerestar, Europe's market leader in starch and starch derivatives, which recorded a á38 million operating loss last year on sales of á1.7 billion.

Montedison's board appeared last week to be playing for time when it rejected Italenergia's bid as "hostile." The board is dominated by representatives of the Milan investment bank Mediobanca, a former ally of Fiat, and the largest remaining shareholder in the company other than Italenergia.

The offer of á2.82 per share has numerous areas of "dubious legitimacy" and a "lack of clarity," while it also seemed to evade a government degree on energy liberalization, the board said in a statement.

The board tried to delay a shareholders meeting demanded by Italenergia to appoint new directors on the grounds that Italenergia's request has not been backed by the proper paperwork.

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