Fiat leads Montedison bid

July 2, 2001 Posted: 1556 GMT

LONDON (CNN) -- A group led by Fiat launched a hostile takeover bid for Italian power company Montedison, valued at 4.95 billion euros ($4.2 billion).

The Italian industrial group and French state-owned power company Electricite de France are offering 2.82 a share -- a 16 percent discount to Friday's closing price -- through their bid vehicle Italenergia.

Fiat will take a 40 percent stake in Montedison, EdF 18 percent, the Tassara group 20 percent and three Italian banks will buy a combined 20 percent,  Fiat said.

The hostile offer pitches two titans of the Italian corporate scene in a battle to control Italy's second-largest electricity company. On one side is the Agnelli family, Italy's best-known industrialists. On the other, Mediobanca, the most powerful investment bank in Italy.

Fiat, the world's sixth-largest automaker, wants a piece of the fast-growing electricity sector in Europe's fourth-biggest economy. Fiat, together with its partners, now controls some 48 percent of Montedison, putting majority control within reach, the company said.

Mediobanca, which saved Montedison from bankruptcy in the 1990s and holds a controlling stake, is likely to put up a big fight against the bid for the conglomerate.

In its bid to rebuff Fiat and partners, Montedison said on Sunday it will sell a 29 percent stake in insurer La Fondiaria Assicurazioni to rival Societa Assicuratrice Industriale and 35 percent of holding company Dieci, which controls papermaker Burgo, for a total of 1.14 billion.

Montedison said it is selling the businesses to focus on the Italian electricity market.

The disposal programme also prevents Fiat using its shareholdings in Fondiaria and Burgo to influence control at the Milan-based investment bank.

Mediobanca could still muster a blocking minority by leading a camp of shareholders accounting for some 35 percent, according to Reuters.

In May, EdF bought a 20 percent stake in Montedison. It was a surprise move after Montedison shareholders blocked a merger -- engineered by Mediobanca -- with recently acquired utility Falck.

But EdF came under intense pressure from the Italian government and European Union regulators, who argued the acquisition was unfair because the French market was not open to competition. Subsequently, EdF's voting rights were curtailed.

By drawing Fiat into a leadership role in the Italenergia group, EdF hopes it will not continue to earn the wrath of the EU and Italian government, analysts said.

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