MILAN (Reuters) - A state-backed plan to revive Italy’s sickly construction industry through a series of mergers could take a step forward next week when its biggest builder, Salini Impregilo (SALI.MI), expects to approve a takeover bid for its nearest rival.
Known as “Project Italy”, the joint public-private initiative has evolving for months in response to an industry crisis that has sent about 120,000 firms broke over the past decade and saddled others with crippling debts.
A Salini executive said on Friday that the company expected to receive state and bank financial backing to be able to give the go-ahead next week to take its first big step under the plan: a takeover of struggling rival Astaldi (AST.MI).
“We are on the home stretch,” Salini’s chief financial officer Massimo Ferrari told reporters on Friday.
He said Salini expected to secure funding commitments totalling 1.5 billion euros (£1.35 billion) by Monday from state investor Cassa Depositi e Prestiti (CDP) and a group of banks, describing the financing as crucial to the entire project.
“We have a board meeting on Monday to give the green light to an offer for Astaldi,” Ferrari said.
Salini wants to be the cornerstone of an industry consolidation, using a takeover of Astaldi and subsequent mergers to create a national champion capable of competing head-on against global firms for major projects at home and abroad.
Italian builders complain that rising indebtedness and weak infrastructure spending have eroded their ability to compete against major foreign firms as head contractors.
However, CDP has yet to commit to Project Italy and is keen to ensure the plan helps the entire sector, not just Salini.
CDP plans to discuss its possible involvement in the project at a board meeting early next week but does not expect to take a final decision, a source close to the situation said. It may simply resolve to pursue more talks, the source added.
Salini wants CDP and a group of unnamed banks to commit to two funding operations: first, 900 million euros ($1 billion) in bank loans to be shared by Salini and Astaldi, followed in October by a 600 million euro share issue by Salini.
Both are required to pull off a successful takeover of Astaldi and position the merged group to expand further.
Astaldi, the country’s second largest builder behind Salini, is under bankruptcy protection. Salini also has heavy debt and fears that a failure of Astaldi could harm its own business, given both are partners in some major projects.
“The fundamental point is (to keep alive) the contracts, both in the country’s interest and our own,” Ferrari said.
Salini shares closed down 3% on Friday, and Astaldi shares ended little changed.
Editing by Mark Bendeich and Louise Heavens