August 2, 2019 / 4:19 PM / 15 days ago

UPDATE 2-Salini secures backing to create Italian construction champion

(Adds details on BAML role)

By Gianluca Semeraro

MILAN, Aug 2 (Reuters) - Italy’s largest builder, Salini Impregilo, has secured financial backing to create a national construction champion, a plan backed by the government and which would include the group’s proposed takeover of troubled rival Astaldi.

Salini made the much-anticipated announcement on Friday, saying it had secured financing commitments for the plan, dubbed “Project Italy”, from state lender Cassa Depositi e Prestiti (CDP), Salini’s controlling family shareholder, Salini Costruttori, and three major Italian banks it did not name.

The banks are Intesa Sanpaolo, UniCredit and Banco BPM, two sources familiar with the matter said.

Project Italy aims to revive the sickly construction industry, using Salini as the cornerstone of a plan to create a champion capable of competing head-on against global firms for major projects at home and abroad.

“With CDP’s support it will be possible to launch Project Italy, an operation aimed at consolidating and developing a sector fundamental for the nation through the aggregation of operators present in the market,” CDP said in a separate statement confirming its commitment to the project.

A merged Salini-Astaldi business is expected to pursue more acquisitions as part of the longer-term plan. Many smaller builders are saddled with crippling debts. About 120,000 others have gone broke over the past decade.

To fund an Astaldi takeover, Salini said it would raise 600 million euros in shares, with CDP to invest 250 million euros, the three banks 150 million and Salini Costruttori 50 million. The remaining 150 million would be sold to the market in an offer underwritten by joint global coordinators it did not name.

The coordinators are Bank of America Merrill Lynch (BAML) and Citigroup. BAML is also acting as financial adviser to Salini on the overall plan.

Project Italy has had a difficult birth, with CDP under pressure to accommodate the interests of smaller builders that fear being swallowed up by Salini. There was also a last-minute hurdle posed by French bank Natixis.

Natixis held security over a number of Salini shares owned by Salini Costruttori as collateral for a margin loan, and CDP was unhappy that a French bank could end up being an equity investor in the new national champion, sources have said.

To resolve the problem, Intesa has agreed to take over the loan from Natixis, with some changes to the terms of collateral, said the two sources familiar with the matter.

Intesa and UniCredit, Italy’s two largest banks, will invest about 70 million each in the Salini share issue, with smaller Banco BPM contributing 9 million euros, the sources said. (Writing by Mark Bendeich; Editing by Edmund Blair)

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