Italian oil major Eni has delayed the planned $3.4 billion sale of its domestic retail business, sources said, as political uncertainty caused by an upcoming referendum on democratic reform hinders major deals across the country.
The state-controlled company had hoped to start the sale process late this year but has rescheduled it for 2017, betting that the fate of Prime Minister Matteo Renzi and his government will become clearer after the vote, according to two sources close to the matter.
Renzi has repeatedly vowed to quit if he loses the referendum. A new prime minister could lead to the appointment of new executives at Eni and a change of strategy, the sources said.
The vote, to be held in late November or early December, calls for a slimming-down of Italy’s political system, the centre-piece of Renzi’s plan to speed up the legislative process.
An Eni spokesman said a sale remained an option and declined to comment further.
The delay in selling the gas and power business, estimated to be worth up to 3 billion euros ($3.4 billion), follows the shelving of other big state-linked asset sales in Italy this year, including privatisations such as a 2.4 billion euros stake in the national postal service.
If Tuscan bank Monte dei Paschi di Siena – in which the state is the biggest investor – delays its planned 5-billion-euro cash call, as other sources have previously said is likely to happen, then the total value of delayed transactions this year could amount to more than 10 billion euros.
Unlike some other deals on ice, Eni’s gas and power business has drawn strong interest from industry and private equity bidders. However, post-referendum turmoil in Rome could lead to changes in the leadership of the company.
The government owns a third of Eni and every three years reviews the composition of the board, including the post of chief executive, currently held by veteran oilman Claudio Descalzi who was appointed under Renzi’s watch in 2014.
The next review is due in April, by which time Italy might have a new prime minister. In those circumstances, Descalzi could be replaced by someone who prefers to keep the domestic retail business, the sources said. Eni’s board therefore felt it was safer to wait until after the review, they added.
As with other state-controlled companies, the government presents a list of nominees for key board positions which are voted on by all investors.
Eni wants to sell the portfolio of more than 8 million Italian gas and power customers as part of a plan to repay debt and fund major oil and gas projects.
“This is a very sensitive transaction in Italy,” a source said. “Eni can’t start selling a unit that caters to 8.5 million clients in Italy without any certainty on execution.”
In addition to serving millions of domestic retail customers, the business holds transport rights on key international pipelines and strategic long-term gas contracts that power much of Italy.
Sources have said that Eni might include some of these strategic contracts in the deal to make it more appetising.
Goldman Sachs and Barclays are overseeing the sale which has already drawn interest from EDF’s Italian unit, Edison, among other European utilities, sources told Reuters in April.
CVC, Bain Capital, Permira and Warburg Pincus are among the buyout funds interested in the business, largely because Italian consumers are typically reluctant to switch suppliers, offering good steady cash flow and returns, the sources said.
Goldman Sachs and Barclays declined to comment.
Descalzi wants to focus Eni more narrowly on exploration and production and aims to raise a total of 5 billion euros in asset sales over the next two years.