Libya Sells 15% Stake in Fiat for $3 Billion : European Banks, Agnelli Interests Are Purchasers
Libya has agreed to sell its 15.19% stake in Fiat S.p.A. to the company’s biggest shareholder and to two banks for $3 billion, Fiat officials announced Tuesday.
The banks, in turn, are to sell their Fiat shares to new investors, they said.
The Libyan sale was long sought by Fiat, Italy’s largest auto maker and private employer, which viewed the Libyan stake as a political liability and an obstacle to obtaining contracts in the United States.
Under the agreement, the West German Deutsche Bank and the Italian Mediobanca will buy about $2 billion worth of common, preferred and savings shares in Fiat, to be offered to new investors.
The remaining third of the deal, worth approximately $1 billion, would be absorbed by the Istituto Finanziario Industriale, the holding company of the Agnelli family that is Fiat’s largest shareholder.
The Libyan holdings included about 205 million Fiat common shares, 88 million preferred shares and 29 million savings shares.
Agnellis Now Control 40%
Fiat officials say the sale raises to about 40% the Fiat stake held directly or indirectly by the Agnelli family. Businessman Gianni Agnelli is chairman of the auto maker.
Officials for the Libyan Arab Foreign Investment Co. that owned the Libyan stake were not available for comment. It was not immediately clear what prompted the move by the Libyan company, which for months has spurned overtures by Fiat to sell.
But the sale price was roughly eight times larger than LAFICO’s original investment of $400 million, and economic analysts speculated that Libya, suffering from the oil slump, might have needed the cash. The price would be roughly equivalent to eight months of Libyan oil sales, which currently hover at about $5 billion a year.
The Libyan stake become a major problem for Fiat after Tripoli’s relations with Washington, and then with Rome, deteriorated earlier this year.
U.S. accusations of Libyan backing for international terrorism were followed by American air raids against the north African country in April. Following the raids, Libya launched an abortive missile attack on a U.S. Coast Guard installation on the southern Italian island of Lampedusa, and relations between Rome and its former colony reached rock bottom.
In the following weeks, Italy expelled 19 Libyan diplomats and at least 12 other nationals. Tripoli expelled 25 Italians.
The Libyan shares owned by LAFICO have been a stumbling block for Fiat in its bid to participate in the American space-based Strategic Defense Initiative, or “Star Wars” program.
The Italian auto maker, however, recently won a U.S. Defense Department contract for combat tractors after it agreed to set up an American trading company to handle the operations.
In addition, Italy and the United States last week signed a letter of agreement to cooperate on the “Star Wars” program. The Libyan sale was expected to clear the way for Fiat’s anticipated participation.
LAFICO bought its stake in 1977 when Fiat, suffering from severe losses and labor problems, turned to Libya for help. In the 1980s, however, Fiat recovered its financial health, and Fiat officials in recent months have made no secret of their wish to rid themselves of the Libyan connection.
On Tuesday, as reports circulated of the impending sale, common shares in Fiat rallied to 16,600 lire, or about $11.72, a 3.8% rise from 15,990 lira the previous day.
Fiat officials said the auto maker’s pretax profits had nearly doubled in the first half of its current financial year ending June 30 to $1.6 trillion lire, or $1.2 billion, from 837 billion lire, or $620 million, in the same period a year ago.
