EDF – Edison: another example of useless political interference on Italian capitalism

Posted on November 21, 2011


The French-Italian soap opera regarding the acquisition of the majority of Edison (the second largest Italian utility) by EDF might come to an end by November. But the conditional tense is mandatory in this case, considering that the story should had come to an end six months ago. On March 2011, EDF presented an offer to its Italian partners to take the control of Edison in change of power stations and a put option on 30.65% of the company still in the hands of A2A, Iren and other Italian utility companies and banks. Everybody was happy with that deal, so that someone at Mediobanca (that of course has an interest in Edison) said: “finally we will call a halt to one of the most shining examples of shareholder agreements that caused so great value destruction”.

Unfortunately all parties forgot they also had to deal with the short-sightedness of Italian politicians, always ready to defend the “Italian capitalism”! So the great strategists at the Minister of Finance decided to stop the deal, stating they had the ace in the hole to keep Italian control on Edison. Six months passed since that political stop, but no “aces in the hole” came out: A2A share price dropped more than 30%, Iren marked a -38% and Edison, thanks to speculative trading, limited losses to 7.3%. Another embarrassing political choice, together with the failed attempt to block Lactalis from acquiring Parmalat just by postponing the meeting by means of legislative tricks.

Finally, at the end of October, EDF presented a new proposal to the Italian partners, at slightly different conditions respect to the previous one: Italian partners will receive a put option at three years, at a strike price linked to Edison’s performances, and (likely) two power plants. A2A and Iren’s respective Boards approved the deal and everybody seemed happy again. But a new shadow appeared: EDF, that will control 80% of the company, does not want to grant the same favourable conditions to Edison’s minority shareholders. Therefore they asked to the Consob (the Italian market Authority) the ability to launch a PTO at a price equal to one year’s average market value (currently €0.84). By this way, minority shareholders will receive no premium at all from the deal and will not get any compensation from the devastating governance of Edison during last years. In case the EDF’s request would be accepted, shareholders will not only suffer a lower offer price but they will also see their company’s share price dramatically fall.

The Consob’s decision is expected by the end of November. In the meantime the Italian Government changed and the Edison’s files are now on the desk of the new Minister, Mr. Passera: until November 15th he was the CEO of Intesa San Paolo, one of the creditors of Carlo Tassara S.p.A., the Italian company that holds 10% of Edison’s share capital… For the first time, the nth potential conflict of interests at Italian politics will risk to benefit minorities’ interests too.

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