Finmeccanica’s Asset Sale Plan Said to Face Delay Amid Probe
Finmeccanica SpA’s effort to sell its stake in power-plant construction unit Ansaldo Energia risks being put on hold for months after the arrest of former Chief Executive Officer Giuseppe Orsi on bribery charges, people familiar with the disposal efforts said.
Newly-appointed CEO Alessandro Pansa may not be able to proceed with the sale of 55 percent of the division until after April, said the people, who asked not to be identified discussing a private matter. Efforts to unload the Ansaldo Breda rail business may also cease, one of the people said.
Delays to the sales threaten the Rome-based defense and aerospace company’s goal of raising 1 billion euros ($1.33 billion) from unloading assets. The group already missed a target of securing binding offers for the units by the end of last year, which is key to trimming 4.8 billion euros of debt.
Uncertainty over the processes prompted Standard & Poor’s, which estimated Ansaldo Energia could fetch as much as 500 million euros for Finmeccanica, to cut the company’s debt below investment grade on Jan. 18, while Moody’s Investors Service and Fitch Ratings said this week they may also cut their ratings to junk. The CEO arrest at the state-controlled company came as the country faces elections Feb. 24-25.
“The operating activities and ongoing projects of the company will continue as usual in order to limit the impact” from Orsi’s arrest, including asset sales, the company said Feb. 12. A spokesman referred to the statement when contacted by Bloomberg. The board named Pansa CEO Feb. 13, the day after Orsi was jailed on accusations of corruption and tax fraud.
Orsi was given full powers in December 2011 to press ahead with cost cuts and focus on aerospace and defense. Asset sales were a central tenet of this turnaround plan. Orsi resigned as chairman and board member today. The company called for a shareholder meeting in April to complete the composition of its management, which will be proposed by the country’s new government. Pansa has effectively been given chairman powers.
Efforts to sell the energy business will have to start anew once a new management team is in place, both of the people said. After Italian Prime Minister Mario Monti’s coalition government collapsed the company had set a target of gathering bids for Ansaldo Energia before the country’s elections. The company won’t be able to name a buyer before the vote, one of the people said.
The outcome of elections is also uncertain. Democratic Party leader Pier Luigi Bersani had a 6 percentage-point lead over former premier Silvio Berlusconi on Feb. 8, before a blackout for polls kicked in. Even if he keeps that advantage, Bersani risks falling short of a majority in the Senate and may have to turn to Prime Minister Mario Monti to form a post-vote alliance, which may prove difficult.
Finmeccanica also faces political opposition to disposals. Italian unions, with close ties with one of Bersani’s allies, have opposed the sale of units on concern about jobs and have openly called for the government to intervene through a strategic fund set up to take minority stakes in the country’s companies. The Italian Treasury has a stake of about 32 percent in Finmeccanica.
Orsi’s arrest is linked to an investigation into a 560 million-euro Indian contract for helicopters in 2010, when he headed the AgustaWestland helicopter unit. He denies any wrongdoing. His lawyer Ennio Amodio said Feb. 12 that evidence against his client is “inconsistent” and that the arrest is “unjustified.” India has put the contract on hold and has begun proceedings for its cancellation. Bruno Spagnolini, current CEO of AgustaWestland, was placed under house arrest.
Siemens AG, Europe’s biggest engineering company, has held talks with Finmeccanica on Ansaldo Energia and was the preferred bidder until the end of September, according to people familiar with the process. South Korea’s Doosan Heavy and Samsung Techwin said today they are considering bids for the unit.
Finmeccanica last year sold a share of aircraft engine maker Avio as part of General Electric Co.’s $4.3 billion purchase from majority owner Cinven Ltd, receiving 260 million euros. Hitachi has been in talks over the loss-making AnsaldoBreda unit. Union opposition to the sale has slowed the process, one the people said.
The arrest increases “the risk of material disruption in the company’s strategy and day-to-day management as well as a delay to its restructuring and asset disposal plan,” Fitch Ratings said Feb. 12.
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