Eni Sells Saipem Stake to Italy's FSI to Reduce Debt Burden

Updated on
  • Italian energy producer sells 12.5% of oil-services company
  • Eni to recoup 6.5 billion euros from transaction with fund

Eni SpA agreed to sell a stake in oil-services company Saipem SpA to Fondo Strategico Italiano SpA in an effort to get its debt off the balance sheet.

Eni, which owns 43 percent of Saipem, agreed to sell a 12.5 percent stake in the Milan-based company to FSI, an arm of state-controlled Italian lender Cassa Depositi & Prestiti, it said in a statement Wednesday. The oil and gas producer will collect about 6.5 billion euros ($7.2 billion) from the deal -- 6.1 billion euros from the repayment of Saipem’s debt and about 400 million euros for the value of the stake.

Saipem’s borrowings have weighed heavily on Eni, its largest shareholder, amid a slump in crude prices. The oil producer’s credit rating was cut by several banks and Standard and Poor’s this year. The transaction will reduce Eni’s net debt by about 5.1 billion euros, according to the statement. 

“The additional financial resources will be used to develop the very significant oil and gas reserves we have discovered over the past few years and to strengthen our balance sheet in line with our targets,” Eni Chief Executive Officer Claudio Descalzi said in the statement. “It enables us to focus on our core activities and to enhance our financial flexibility.”

Balance Sheet

Shares of Eni rose 0.9 percent to 15.03 euros at 9:30 a.m. London time. Saipem gained 12 percent to 8.915 euros.

It’s very positive for Eni and “will allow the group to have a strong balance sheet and focus on exploration and production development,” Ahmed Ben Salem, a Paris-based analyst at Oddo & Cie, said by phone.

The reduction in the ratio of net debt to capital employed, also known as gearing, will also benefit Eni, said Exane BNP Paribas’ analyst Aneek Haq and RBC Capital Markets’ Biraj Borkhataria.

Saipem Plan

Saipem also unveiled a plan to boost its finances by selling as much as 3.5 billion euros of new shares by the first quarter of next year and refinancing 3.2 billion euros of debt, according to a separate statement.

Oil-service companies’ earnings have been squeezed as the crude-price slump forced clients to cut investment and defer or cancel projects. In July, Saipem announced plans to cut 8,800 jobs and lowered its profit forecast for the year. Its peers in the U.S. have started a third round of layoffs as hopes fade for a price recovery this year.

The new strategic plan will establish Saipem as “a leading diversified services company,” while the restructuring measures will “improve the profitability of the business,” Goldman Sachs Group Inc. said in a note.

Eni was downgraded by Citigroup Inc., Canaccord Genuity Group Inc. and Kepler Cheuvreux in January and by Jefferies Group LLC in February. Standard & Poor’s cut Eni’s long-term rating in April and lowered its outlook to negative earlier this month, citing deteriorating credit metrics.

Cassa Depositi & Prestiti, 80 percent-owned by the government, is also Eni’s biggest shareholder, with a 26 percent stake.