DEALTALK-Italian dynasties battle for Impregilo

A long family fight for control of Italys biggest builder is heating up ahead of a shareholder meeting on July 12 that could lead to a board overhaul at Impregilo and pave the way for a takeover bid.

The clash between two prominent Italian families of construction entrepreneurs, the Gavios and the Salinis, has developed into a rare public proxy battle in a country where dealmaking usually takes place behind the scenes.

The eponymous Gavio and Salini groups each hold nearly 30 percent of Impregilo and have three weeks to lure fellow investors and win control of the Milan-based heavyweight, which is worth 1.4 billion euros ($1.78 billion) and is almost debt-free.

The activist fund Amber Capital, whose 5 percent makes it Impregilos third-biggest investor, and other minority shareholders will tip the balance of a battle where every vote counts.

"I believe we are on razors edge," said one Milan-based analyst, who declined to be named. "Investors I have talked with appear to be in favour of Salini. But Gavio has friends in high places."

Gavio is seen as benefiting from its ties to power broker Mediobanca - which Beniamino Gavio, head of the group, calls "the family bank" - while Salini is seen as more market-friendly.

Impregilo first gained international prominence in the 1960s for helping to rescue the Abu Simbel ancient temples in Egypt and is now contributing to the Panama Canal expansion.

The company came close to bankruptcy in 2007, when it was embroiled in a fraud investigation into waste contracts in Naples. The case dragged on for years but today Impregilo is in better shape - it has hundreds of millions of euros in cash from compensation for assets seized in the fraud probe, while its 29 percent stake in Brazilian motorway group EcoRodovias has proved to be a successful investment.

The views of Salini and Gavio over how to run Impregilo could not be more different. Salini, owned by a litigious family based in Rome, wants to sell EcoRodovias and merge itself with Impregilo to create a pure builder focusing on Africa and Asia. It promised a jumbo dividend.

The Gavios, a traditional family based in the small northern town of Tortona, has created a diversified empire including lucrative highways. Its plan for Impregilo is to continue to focus on both construction and concessions in Italy and South America.

The rival families have said that a full takeover of Impregilo could not be ruled out to protect their business interests but there are concerns that a drawn-out and battle would harm minority shareholders.

Impregilo shares have risen 130 percent since September.

STRING OF COMPLAINTS

The fight also highlights the different personalities of the two dynasties heirs: the hands-on Beniamino Gavio, who is proud of his local roots, and the flamboyant Pietro Salini, who loves hunting safaris in Crimea.

The pair of them shook hands in a show of fair play at the April shareholder meeting, when they met for the first time in public.

However, in the run-up to the July shareholder meeting to vote on a Salini request to oust the Gavio-controlled board, there have been cross-accusations and a string of complaints with market regulator Consob.

Such developments have fuelled talk that Consob could step in, possibly postponing the shareholder meeting.

Salinis dividend proposal has forced media-shy Gavio to adopt a more market-oriented rhetoric recently, with hints of better shareholder rewards. Both, however, have not entirely dispelled concerns that their plans would not harm minority investors.

"Competition is working. The raider Salini has stimulated Impregilos management and now they are all market-friendly. But the key issue is who shall investors trust more?" said a fund manager who declined to be named.

Both Salini and Gavio have proposed high-profile board lists. Salini has put forward a former Goldman Sachs banker as chairman while Gavio has chosen for the same post a director of UniCredit, Italys biggest bank by assets.

The July shareholder meeting, however, may not be the final chapter of the story. There is talk that some investors may back Salini at the meeting in the hope of prompting a takeover bid from Gavio, which can rely on stronger support from banks.

An analyst said he expected any bid to carry no premium.

Should Salini be pushed out of the frame, construction expert Aldo Norsa believes it would make sense for Impregilo to reconsider an old plan to merge with Astaldi and eventually bring Vianini Lavori on board.

"Once the Salini attack is averted, I would not be surprised if they resumed talks," Norsa said.