Italy's Eni stake sale implies 10 percent buyback program

MILAN/ROME (Reuters) - Italy's Eni ENI.MI will have to buy about 10 percent of its stock in a buyback program if the government is to sell a 3 percent stake and keep control of the oil and gas group, sources said on Thursday.

The logo of oil company Eni-Saipem is pictured at its headquarters in Rome February 8, 2013. REUTERS/Alessandro Bianchi

Prime Minister Enrico Letta said on Thursday the government would sell a 3 percent stake in Eni in 2014 as part of a wider privatization program to reduce public debt. The sale is expected to raise about 2 billion euros ($2.69 billion).

But Letta added that the state’s stake would not fall below a key 30 percent level thanks to a buyback program already launched by Eni.

The Treasury currently has a 4.34 percent stake in Eni while state lender Cassa Depositi e Prestiti (CDP) holds another 25.76 percent, bringing the state’s total holding to 30.1 percent.

Eni is Italy’s biggest listed company and a strategic investment for the state because of its key long-term gas contracts and rich dividend flows. The company posted a net profit of 7.79 billion euros in 2012,

Staying above the 30 percent threshold would make it easier, under Italian rules, for the state to ward off hostile attention from potential competitors.

Last year Eni announced a buyback program on up to 10 percent of its stock for a maximum of 6 billion euros.

“The Eni deal implies a buyback on around 10 percent of capital,” a source close to the matter said.

A second source confirmed the buyback should be on about 10 percent of stock if the state were to keep its holding above 30 percent.

A Treasury statement said that if Eni executed its buyback program to the full, the state’s stake would rise to a little more than 33 percent.

“The subsequent sale on the market of the 3 percent by the ministry would in any case ensure an overall public stake in Eni more than the takeover threshold of 30 percent,” it said.

At the end of October Eni said the company would start buying back shares in the coming weeks.

“The buyback is expected to be implemented much quicker (than expected) ... to secure the control of CDP and the Italian treasury above 30 percent,” Mediobanca analyst Andrea Scauri said.

Eni shares closed down 0.44 percent on Thursday against a European oil and gas index .SXEP down 0.14 percent.

On Thursday Letta said Italy would sell stakes in a series of public entities to raise up to 12 billion euros next year to help to cut public debt.

Besides the Eni stake, the government said it would sell part of CDP Reti, the vehicle that holds a little more than 30 percent of transport-related gas service company Snam SRG.MI.

Sources have said that power grid company Terna TRN.MI, controlled by CDP, could be packaged into the CDP Reti vehicle. ($1 = 0.7429 euros) (Editing by David Goodman)