Italy Seeks to Block Lactalis From Gaining Control of Parmalat
Italy’s government declared dairy company Parmalat SpA (PLT) “strategic,” and said it would seek to promote an Italian shareholder group in a bid to block France’s Groupe Lactalis from gaining management control.
“We’ve been meeting with the principal producers in the industry to try to forge an Italian alliance that would combine producers and banks to build an Italian multinational that can compete internationally,” Industry Minister Paolo Romani said in testimony to parliament in Rome today.
Prime Minister Silvio Berlusconi’s Cabinet today passed a decree allowing Parmalat to delay an April shareholders meeting where Lactalis, its biggest investor, would likely have gained management control. The Cabinet is also reviewing further measures to prevent foreign takeovers of Italian companies, the government said in an e-mailed statement.
The decree comes a day after Lactalis agreed to boost its stake in the maker of Santal juices and long-life milk to 29 percent, just short of the 30 percent threshold that requires a full takeover bid under Italian law. Still, the current stake should be enough for Lactalis to impose its choice of management at the shareholders meeting and replace Chief Executive Officer Enrico Bondi.
Romani said Parmalat accounts for about 9 percent of Italian food production and that the company is “strategic” to national interests. Italy’s antitrust authority is also investigating whether Lactalis’s control of Parmalat would violate competition rules, news agency Radiocor reported, citing Antonio Catricala, head of the regulator.
Parmalat rose as much as 1.8 percent after the decree was announced, erasing earlier declines. The shares were up 0.6 percent to 2.31 euros at 4:32 p.m. in Milan. The company has a market value of about 4 billion euros ($5.7 billion).
Spokespeople for both Parmalat and Lactalis said they couldn’t immediately comment on the government’s decision.
“From a legal and regulatory perspective, we believe that any protectionist strategy put forward by the Italian government would be problematic, not least as Parmalat does not compete within a regulated sector,” said Andy Smith, an analyst at MF Global in London.
Lactalis bought the shares from a group of foreign investors that had been pressuring Bondi to use the company’s 1.44 billion euros in net financial assets to either make acquisitions or pay out bigger dividends. Bondi accumulated the funds through lawsuits against the company’s former banks and accountants, who he accused of helping sustain the fraud that led to the company’s 2003 bankruptcy.
Out of Bankruptcy
Bondi was named by the Italian government that year to lead Parmalat out of bankruptcy, and he returned the maker of Kyr yogurt to stock-market trading in 2005.
Today’s decree could give more time for an Italian shareholder group to emerge and challenge Lactalis’s control. Intesa Sanpaolo SpA (ISP), Italy’s second-largest bank and the holder of about 2 percent of Parmalat, has sought support to keep the company in Italian hands. It’s proposed its own management list that includes Bondi.
Ferrero SpA, maker of the Nutella chocolate spread, has said that it favors Italian ownership of Parmalat. Granarolo SpA, Italy’s second-biggest dairy company, has also shown interest in the company.
Ferrero will consider any proposal put to it that makes sense, a company official said today by phone, declining to comment on whether the confectioner is in talks with Intesa or Granarolo, or whether it has met with Lactalis.
The government action comes less than a month after French luxury-goods maker LVMH Moet Hennessy Louis Vuitton SA bought Italian jeweler Bulgari SpA and amid efforts to prevent Electricite de France SA from gaining control of Italian power company Edison SpA. (EDN) The French utility is embroiled in a dispute with its Italian partners over management of the company.
France has adopted similar measures to protect its companies, provoking charges by the European Commission that it’s trying to limit competition. The French government in 2005 passed an anti-takeover decree driven by speculation that PepsiCo. Inc was planning a bid for yogurt maker Danone.
Today’s move by the Italian government also comes after the country in 2006 pressed the European Union to take action against France for thwarting a takeover of Suez SA by Enel SpA. France arranged the merger of Suez and Gaz de France SA to block a purchase by Enel.
In January, the French Finance Ministry set up 11 committees to monitor core industries, including cars, aerospace, and chemicals. Italian Finance Minister Giulio Tremonti may be considering a similar approach, declaring four industries strategic -- food, energy, defense, and telecommunications -- and requiring state approval for any foreign takeover, Corriere della Sera reported, without saying where it got the information.
Lactalis, a French cooperative that has a dairy joint venture with Nestle SA, raised its stake in Parmalat days after it emerged that General Mills Inc. (GIS) was in exclusive talks to buy 50 percent of Yoplait from PAI Partners. Lactalis’s 1.4 billion- euro bid for all of Yoplait was rejected last year.