SEA Change

Milan offers a majority stake in its airport authority

Due to financial distress, the municipality of Milan is preparing to sell its majority stake in the Malpensa and Linate airports authority, SEA. The idea is to sell a 50% stake, which could fetch at least €750 million ($927 million).

Just at the end of last year, the city sold a 29.7% stake to Italian investment fund F2I for €385 million.

Milan has faced strong pressure to sell some assets to reduce its heavy debt. The city considered an initial public offering of SEA shares after the European financial meltdown last year but opted instead for an auction. Its financial situation is still perilous and is forcing the mayor, Giuliano Pisapia, to push for a second disposal of SEA shares.

The big difference this time, however, is that the offering provides a controlling stake in the airports. This has raised the importance of the deal and is prompting much jockeying behind the scenes.

The Milan government would like to retain a stake of about 20% in the airport authority, so first it is trying to obtain another 14.5% from the province of Milan. If it is able to do so, the city’s holdings in SEA would climb to 69.5%. (The province of Milan would exchange its SEA shares for those in a highway company held by the city.) Thus, the municipality would be left with a 19.5% stake after selling a 50% share in the airports.

If the exchange of shares does not take place by July, so urgently does the municipality need money that it will nevertheless proceed with selling the 50% stake—leaving it with only 4% of the shares.

F2I, which is owned by Cassa Depositi e Prestiti and some major Italian banks, is the front-runner to buy the SEA shares. By acquiring the offered 50% stake, its holding in the airport authority would jump to 79.7%.

The Italian government owns 70% of Cassa Depositi e Prestiti, so if F2I makes the purchase, Rome would acquire control of a company owned by local authorities, which is definitely not considered a privatization.

But other players are eyeing the SEA shares, too. Among them is the Indian Srei fund, which tried to buy the first stake offered last year. The Frankfurt airport authority, Fraport, may also put in a bid, and so might the Australian Macquarie Group.

The Milan municipality plans to make a decision on how to proceed before the end of the summer.

Pisapia is considering holding a referendum that would allow citizens of the city to vote on selling SEA shares or facing the prospect of huge tax increases. But the fate of a potential referendum appears to be sealed.

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