Financial Times: Italy's Eni dilemma: “Total and Shell would readily gobble up Eni.” (ShellNews.net)

By Paul Betts

Published: October 12 2004

Rome wants to raise a further €100bn from privatisations to cut its state deficit to conform to European rules. The problem is the most valuable asset left to sell is its 30 per cent stake in oil group Eni.

Shedding this stake could raise anything up to €30bn. But doing so would put the country's biggest and most profitable company at risk of foreign takeover. Is Rome prepared to take the plunge? The short answer is no.

Answering a question during a parliamentary hearing, the veteran Eni boss, Vittorio Mincato, warned the company risked being snapped up by a rival if the government sold its remaining stake. The response by Domenico Siniscalco, treasury minister, was quick. Rome is keeping its stake.

Of all Italian companies, Eni and Formula 1 icon Ferrari are the two that would provoke a popular uprising should they pass into foreign ownership. Ferrari nearly did when Ford proposed to buy it before Fiat came to the rescue.

Total and Shell would readily gobble up Eni. For Italy's public finances, that would not be too bad since they would have to offer a hefty premium. But for Rome it would be political suicide.

The alternative? Encouraging Eni to double its size, turning it into predator rather than prey. But to finance an acquisition campaign Eni would need to use its shares as well as cash. That would dilute Rome's stake. It would make Eni more vulnerable but more expensive to acquire - pricing it as a normal company on its asset value.