Saipem SpA (SPM) shares tumbled in Milan after Chief Executive Officer Pietro Franco Tali and Alessandro Bernini, chief financial officer at the company’s biggest shareholder, Eni SpA (ENI), resigned yesterday.
The shares, suspended by the Italian exchange after dropping 4.3 percent to 32.68 euros yesterday, resumed trading today along with the savings category. Saipem, which initially failed to set an opening price, dropped as much as 14.3 percent, the steepest decline since November 2008, and was down 9.9 percent as of 9:39 a.m. in Milan, with more than 6 million shares traded, more than four times the average daily volume in the last six months.
Europe’s largest oil contractor by market value appointed Umberto Vergine to replace Tali, the company said in a statement yesterday. Massimo Mondazzi will replace Bernini, Eni said separately. Tali, 62, had been CEO since 2000; Bernini served as Saipem’s CFO until 2008.
Morgan Stanley and Exane BNP Paribas, which were among brokerages reducing valuations on the news, cut their price targets by 21 percent to 45 euros from 57 euros, and 7 percent to 38 euros respectively, with an overweight recommendation and an outperform rating unchanged. Both highlighted unexpected changes in management as a negative for the shares.
“Short-term trading is sentiment driven and there is near- term downside, but the fundamentals of Saipem remain intact,” Mick Pickup and Tom Ackermans, London-based analysts at Barclays Capital, wrote in a note. Barclays reiterated an overweight rating with a price projection lowered by 9 percent to 42 euros.
CA Cheuvreux downgraded the shares to outperform from selected list, while Mediobanca Securities cut its recommendation to neutral from outperform.
CEO Tali’s resignation “is not coming at the right time as Saipem has to face some headwinds in both Offshore and Onshore E&C,” Cheuvreux analyst Geoffroy Stern said in a note. “Consensus still has to come down for both 2013 and 2014.”
Company business was always conducted properly under his tenure as CEO, Tali said in yesterday’s statement.
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