Finmeccanica up on report Doosan closer to unit stake bid

MILAN/SEOUL Thu Aug 22, 2013 11:31am EDT

The headquarters of Italian defence and aerospace company Finmeccanica is seen in Rome May 3, 2012. REUTERS/Max Rossi

The headquarters of Italian defence and aerospace company Finmeccanica is seen in Rome May 3, 2012.

Credit: Reuters/Max Rossi

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MILAN/SEOUL (Reuters) - Shares in Italian defense group Finmeccanica (SIFI.MI) rose 7 percent on Thursday on a report that South Korea's Doosan Heavy Industries & Construction (034020.KS) was planning to raise money to buy a majority stake in energy unit Ansaldo Energia.

The Korea Economic Daily newspaper said Doosan Heavy was set to issue $500 million worth of global depository receipts (GDRs) to finance a bid for 55 percent of Finmeccanica's Ansaldo Energia. The paper, which cited investment banking sources, said the deal was expected to be completed by early next month.

Shares were up 6.7 percent at 4.1 euros by 1310 GMT, outperforming a 2.4 percent rise in Italy's blue-chip stock index .FTMIB.

Doosan Heavy said in a regulatory South Korea filing on Thursday that it was considering issuing an unspecified number of GDRs, but that nothing had yet been decided.

A spokesman for Doosan declined to comment when asked if the funds would be used to buy the Ansaldo Energia stake. Finmeccanica also declined to comment.

The defense conglomerate, 30-percent controlled by the Italian treasury, has been trying to sell its stake in Ansaldo Energia as well as other assets for more than a year to cut debt.

The remaining 45 percent of Ansaldo Energia is held by U.S. private equity firm First Reserve.

VALUATION QUESTION

The Korea Economic Daily said the price for Finmeccanica's stake was estimated at 1.3-1.5 billion euros ($1.7-2.0 billion), which was much higher than any estimate so far.

The price tag mentioned in the paper, if confirmed, would imply a valuation for the whole of Ansaldo Energia that is double what the company was worth when First Reserve bought its stake just two years ago.

Finmeccanica said in March 2011 the deal with First Reserve valued the share capital of Ansaldo Energia at 1.23 billion euros.

Analysts have expected Finmeccanica to fetch between 300 million and 500 million euros in cash for its stake in Ansaldo Energia, excluding debt.

At the end of 2012, Ansaldo Energia's net debt stood at 300 million euros, while Finmeccanica's stood at 3.4 billion euros.

Finmeccanica, which is refocusing on its core aerospace and defense business, has said it is hoping to raise 1 billion euros from the sale on transport and energy assets, which include loss-making train maker AnsaldoBreda and rail technology unit Ansaldo STS (STS.MI).

Besides Doosan, Germany's Siemens (SIEGn.DE) and South Korea's Samsung had also expressed an interest in Ansaldo Energia. The sale, which needs a green light from the Italian government, has been delayed by management changes at Finmeccanica following a judicial probe over alleged corruption, and political uncertainty in Italy.

Industry Minister Flavio Zanonato said in June he was against selling portions of Finmeccanica without first checking if they could be kept in Italy.

"Doosan is the only one left in the race for Ansaldo Energia," a Finmeccanica trade union source told Reuters. "The ball is now in the government's court."

The mayor of Genoa, where Ansaldo Energia is based, told Reuters he was "very worried" about a possible sale of the company to a foreign player. Finmeccanica is Italy's second biggest private employer after carmaker Fiat and Ansaldo Energia employs 2,900 people.

($1 = 0.7476 euros)

(additional reporting by Andrea Mandala, Stephen Jewkes and Valentina Za in Milan, Joyce Lee in Seoul; writing by Silvia Aloisi; editing by Jason Neely and Lisa Jucca)

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