Shareholder Rifts Casts Shadow Over SEA Debut

November 23, 2012

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A rift between the two biggest shareholders in Milan airport operator SEA has put its share sale in doubt less than two weeks before it is due to make its stock market debut.

F2i, an infrastructure investment fund with a stake of just under 30 percent in SEA, has been critical of the listing and accused the company of withholding sensitive data, including negative airport traffic numbers, from its prospectus.

A source close to the matter told reporters Italian market regulator Consob had told SEA to add the relevant information - an embarrassment for the company and its largest investor, the city of Milan, in the middle of the marketing process.

SEA declined to comment.

"Changing the prospectus halfway through the roadshow and having your investors bicker in public does not bode well for the IPO (Initial Public Offering). The whole thing looks pretty shaky," said a Milan-based fund manager who spoke on condition of anonymity.

SEA runs Milan's Linate and Malpensa airports and plans to float up to 23.8 percent of the group. The listing is backed by the city of Milan, which has a 56 percent stake in SEA.

The company, which was already forced to scrap plans to list last year because of market turmoil, has set a price range of €3.2-€4.3 per share, valuing it at up to EUR€1.075 billion (USD$1.4 billion), according to the prospectus.

"The lower end of the range reflects the company's fundamentals, but this is a difficult time to be going for an IPO," said Gian Paolo Rivano, a fund manager at Gesti Re, who said he was staying away from the share offer.


F2i, which bought its stake in SEA last December when the group was valued at EUR€1.3 billion or around €5 euros per share, is opposed to the terms and the timing of the listing as it would be forced to write down the value of its own holding.

In a November 19 letter to the Milan city council, seen by reporters, F2i said it had "no obligation to accept a listing at any cost or context whatsoever."

F2i declined to comment.

This puts SEA's chief financial officer, Michele Pallottini, who was chosen by F2i, in a difficult spot. He is promoting a listing in Italy and abroad which his main backer disagrees with. The marketing process started on November 19 and ends November 30.

SEA chairman Giuseppe Bonomi, whose pledge to pay a dividend of up to 70 percent of profits is also contested by F2i, said last week there had been a lot of investor interest.

A source at one of the offer's global coordinators was, however, more cautious. "Since Thursday we have seen an increase in orders, we hope it's a sign of a rising trend," the source said, adding that foreign investors did not seem too aware of the spat between F2i and the city of Milan.

In the listing, which will also include the issuing of new shares, the cash-strapped Province of Milan is selling a 14.6 percent stake. The city of Milan and F2i will have their stakes diluted to 48 and 26 percent respectively.