Italian government picks Certares offer for stake in ITA Airways

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Italy has picked a group led by U.S. private equity fund Certares, backed by Air France-KLM and Delta Air Lines Inc for exclusive talks on buying a majority stake in ITA Airways.

Earlier this year, the Italian government gave the green light for privatisation of ITA. The consortium beat a rival bid presented by shipping group MSC and Germany’s Lufthansa.  ITA Airways is the successor to Alitalia.

Details of the Certares offer were not made public. However, three close sources said it would leave the Italian Treasury with a robust minority stake. One source said that stake with one would be “at least 40%”.

Certares, which has its European headquarters in Milan, had reportedly been offering around 600 million euros for a stake of about 60%. Two of the sources, Reuters reported, said the valuation in the deal was considerably higher than that.

Rome’s main Fiumicino airport would be at the centre of the industrial plan presented by Certares, they added.

Air France–KLM involvement

The decision was welcomed by Air France-KLM who said it would initially be a commercial and operational partner for Certares.

“Air France-KLM at this stage is not investing in ITA’s capital structure. However, Air France-KLM Group could consider in the medium term to take a minority stake in ITA,” the company said in a statement.

The sources said both Air France and Delta had expressed interest in entering ITA’s capital structure at a later stage.

Lufthansa MSC bid

A separate source said MSC and Lufthansa had offered 850 million to 900 million euros for a larger 80% stake.

“We take note of the decision. We are still convinced our offer with MSC is the better solution,” a Lufthansa spokesperson said. They added Italy had chosen the option that retained greater state influence. MSC declined to comment.

“This is surprising because MSC-Lufthansa was previously considered the preferred bidder,” said Johannes Braun from Stifel Research. “From an investor perspective (for Lufthansa), it’s a relief.” This taking into account r predecessor Alitalia’s history of running up losses.

When will the deal be sealed?

Outgoing Prime Minister Mario Draghi’s government is pressing on with attempts to strike a preliminary deal before the Italian general election on Sept. 25.

The Brothers of Italy (Fdl) party, which is topping the polls, wants the next administration to be allowed to make the final decision on ITA.

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