• Hitachi bought Finmeccanica interest in Ansaldo STS, rail unit
  • Hitachi mandatory bid for rest of Ansaldo STS fell short

Paul Singer’s Elliott Management holds securities that could give the U.S. hedge fund a stake of almost 30 percent in Ansaldo STS SpA, a further blow to Hitachi Ltd’s plan to gain full control of the Italian train signaling company, according to people familiar with the matter.

Elliott, which owns a 15.7 percent stake in Genoa, Italy-based Ansaldo STS, further increased its long positions to just below the mandatory takeover threshold of 30 percent, the people said, asking not to be named because the stock exchange filing is still not public. A Milan-based spokesman for Elliott, Ansaldo STS’s second-largest investor, declined to comment.

Tokyo-based Hitachi last year bought Finmeccanica SpA’s interest in Ansaldo STS, about 40 percent of the share capital, as well as its unprofitable train-making unit AnsaldoBreda. Hitachi Rail Italy Investments’ mandatory bid for the rest of Ansaldo STS led to a court battle with investment funds, with market regulator Consob requesting a higher price and Hitachi gathering only an additional 6.4 percent stake after the extended offer ended this week, falling short of their goal to acquire the entire share capital and delist the company.

Elliott’s fund as well as investors Bluebell Partners Limited and Amber Capital maintain that the price offered by Hitachi for the remaining Ansaldo STS shares -- voluntarily raised to 9.68 euros each from 9.50 euros -- is too low. Elliott believes a correct valuation of Ansaldo STS is more than 13 euros per share, one of the people said. The stock was trading at 9.865 euros Thursday in Milan, valuing the company at 1.98 billion euros ($2.24 billion).

Giuseppe Bivona, a former Goldman Sachs Group Inc. and Morgan Stanley banker who’s a partner in Bluebell, said one of the reasons Hitachi failed to get majority control of the Italian company in the tender offer was its “unprecedented” decision to boost the offer price by 18 cents and at the same time signaling the intention to oppose Ansaldo STS’s proposal to pay a dividend of 18 cents a share.

Consob had requested Hitachi to increase the bid price to 9.899 euros, but an administrative court suspended the regulator’s request in February and that decision was upheld by the tribunal on Wednesday. The court scheduled a hearing on the merits of the case for May 17.

The investment funds also have filed complaints to the Milan prosecutor’s office, claiming that Finmeccanica and Hitachi colluded to offer a lower price for the Ansaldo STS shares, and authorities currently are investigating the issue. Financial police carried out searches at offices of Ansaldo STS and Finmeccanica on Wednesday. Hitachi and Finmeccanica have repeatedly said they acted correctly in determining the price for the tender offer.

Finmeccanica Chief Executive Officer Mauro Moretti said at a press conference Thursday that he’s confident about the outcome of the investigation, adding that negotiations with Hitachi involving Ansaldo STS and AnsaldoBreda had been conducted separately.

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