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The board of Impregilo SpA (IPG), Italy’s biggest construction contractor with projects from Brazilian highways to the Panama Canal, was ousted by investors led by competitor Salini SpA.
Salini, which wants to merge its family business with Impregilo, won shareholder approval at a Milan meeting today to revoke the board backed by Italy’s Gavio family. Investors appointed directors led by Claudio Costamagna, a former head of European investment banking at Goldman Sachs Group Inc., who was named chairman.
“We will bring the merger proposal to the board and then ask shareholders to approve it,” Pietro Salini, who’s set to become Impregilo’s new CEO, told reporters after the meeting. “We hope everyone will work in the interest of shareholders.”
Impregilo, with a market value of 1.36 billion euros ($1.67 billion), builds tunnels and roads and is working on the expansion of the Panama Canal. Its main highway concession asset is a 29 percent stake in Brazil’s Ecorodovias, the manager of five toll roads in the country. Gavio and Salini have waged a proxy battle that gave minority shareholders such as Amber Capital LP a rare opportunity in Italy to decide the outcome. Amber, with a stake of 8.5 percent, voted for the board revocation, said legal representative Umberto Mosetti.
The Gavio and Salini families each own a stake of just less than 30 percent in Milan-based Impregilo, the threshold that triggers a mandatory bid. Salini has claimed that Impregilo under Gavio hasn’t created enough shareholder value and it hasn’t respected the company’s corporate mission.
“Return for shareholders was close to zero” in the period Gavio was the controlling investor, Nicola Ricolfi, a fund manager at Nextam Partners SGR SpA, which owns a stake of about 0.2 percent in Impregilo, told investors at today’s meeting.
The stock’s performance in the past five years was hurt by a 2007 ruling by an Italian court that seized 750 million euros in assets as part of a Naples waste probe. The decision was later reversed.
Still, Impregilo shares have risen 79 percent since Salini announced its first purchase on Oct. 4, the best performance in Italy’s benchmark FTSE MIB Index (FTSEMIB) in the period. Some analysts are concerned the shares offer little upside after their recent performance and because of the risk the Salini-Gavio power struggle may result in a deadlock. Impregilo was down 0.5 percent to 3.28 euros as of 3.53 p.m.
“The result is a stalemate,” said Pompeo Locatelli, an investor with 12,000 Impregilo shares. “There will probably be a request for revocation of the new board as well. Whoever wanted control should have launched a bid offer.”
Both Gavio and Salini have ruled out a full bid for Impregilo, which could cost about 1 billion euros, and have said they don’t want to sell their stakes.
At the center of the shareholders’ tussle are proposals of unlisted Salini to sell Impregilo’s highway concessions, pay a special dividend of as much as 800 million euros and merge the two construction businesses, targeting 7.5 billion euros of revenue by 2015. Salini said in an interview on July 10 his family would back a merger “unanimously.”
Gavio opposes a combination and has enough shares to veto any extraordinary transaction. He’s proposed a share buyback of as much as 300 million euros and an extraordinary dividend of at least 100 million euros, if the company has enough cash. “The merger is unfeasible,” said Bruno Binasco, who heads IGLI, an investment company controlled by Gavio, during the meeting.
Beniamino Gavio, who heads his family’s business, said in a July 5 interview that his rival is seeking control of the board in order to push through a merger that would use proceeds from the Ecorodovias stake sale as a guarantee for bank financing.
The two families have spent the last two months in a war of words and legal actions. A legal challenge by Gavio against Salini’s proxy collection is still pending and the Milan tribunal will make a decision Aug. 22. Gavio also filed a complaint with market regulator Consob, claiming that Salini and Amber acted in concert. Salini’s lawyer Sergio Erede denied that.
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