Paul Singer Funds Hold Position of 29% in Italy's Ansaldo STS

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

Paul Singer investment funds hold securities that could give them a stake of about 29 percent in Ansaldo STS SpA, a further blow to Hitachi Ltd’s plan to gain full control of the Italian train signaling company, Italy’s stock market regulator Consob said.

The funds boosted their stake in Genoa, Italy-based Ansaldo STS to about 20 percent as of March 14, from 15.7 percent previously, and raised their long positions to an additional 8.8 percent, Consob said in a filing Friday. Bloomberg News reported Thursday that Singer’s funds had a total position in Ansaldo STS close to 30 percent, according to people familiar with the matter.

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.

Singer’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. They believe a correct valuation of Ansaldo STS is more than 13 euros per share, one of the people said. The stock was little changed at 9.95 euros Friday in Milan, valuing the company at 1.99 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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