Fiat board approves Montedison bid

Milan - The board of Italy's biggest conglomerate, Fiat, announced on Sunday that it had approved a plan to buy a "major stake" in the Italian holding company Montedison.

"The terms of the operation will be provided in the near future," a statement said.

It did not make clear if the planned bid was for a controlling stake of Montedison, which has interests in the energy, telecoms, insurance, agri-food, chemicals, engineering and shipbuilding sectors.

But Montedison said later on Sunday it would sell several assets to reduce its debt in a move analysts said looked like a defensive measure aimed at fending off a takeover.

Italian and French newspapers had speculated that the emergency meeting of Fiat's board on Sunday would result in the announcement of Fiat and France's Electricite de France (EdF) joining forces in a E4.9bn ($4.2bn) hostile takeover bid for Montedison.

Italian papers said on Saturday that Fiat had obtained credit lines worth a total E20bn for a hostile bid for Montedison.

But the Fiat statement was vague on its planned bid, saying only that the board looked at "evaluating its own assets in an ad hoc company that might involve a major stake in Montedison."

A source close to the affair said that meant Fiat wanted to create a new company tasked with acquiring the Montedison stake and that "Fiat will obviously not be the only one" in the new company.

While Fiat made no mention of EdF, the French state-owned energy company issued its own statement in Paris confirming its "interest" in joining with Fiat in Italy's energy sector.

EdF, Europe's largest energy provider, is Montedison's largest shareholder with a 20% stake.

For Fiat and EdF, Montedison's most prized asset is its 61.33% stake in Italian power producer and gas importer Edison. Edison plans to merge with another Montedison energy unit, Sondel, to challenge state-owned Enel as Italy's top electricity producer.

The acquisition would also fit in with Fiat's strategy of diversifying away from car manufacture into services. Montedison's telephone and insurance businesses also offer synergies with Fiat but the car giant could accelerate the divestment of Montedison's agri-food and chemical assets.

And an added bonus for Fiat would be to shake down powerful Italian banking group Mediabanca, which has strong influence over Montedison - and which has been a dealmaker and breaker in most of Italy's big industrial transactions over past decades.

The Italian government is taking a "neutral" stance to a potential Fiat-EdF bid, with European Affairs Minister Rocco Butiglione saying the plan "would be acceptable, on condition EdF does not hold a majority stake and does not become the reference shareholder".

In its statement on Sunday, Montedison said it would divest itself of its investments in insurance companies Sai and Fondiaria and in paper firm Dieci.

The operation would allow the group "to reduce its debt to at least 1.14 billion euros" and to pursue its plans for Edison, Montedison's statement said.

Referring to a possible takeover bid for it or for Fondiaria, Montedison said the sale price of its 29% stake in Fondiaria would be adjusted accordingly. -Sapa-AFP

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