Italian post office inches toward IPO
As anyone who has sent a letter in Italy can attest, postal delivery service can be a maddening exercise in patience.
But Massimo Sarmi, the chief executive of Poste Italiane SpA, came to New York earlier this week with a contrary message: The Italian postal company is shaping up, becoming technologically savvy and readying for a multibillion euro initial public offering as soon as the end of 2006.
Poste Italiane is advancing technologically and preparing for a multibillion euro initial public offering, possibly by the end of 2006.
Sarmi acknowledged a pair of potential spoilers likely to affect the IPO’s timing. For one, there are the Italian national elections, in which media tycoon Silvio Berlusconi, the current center-right prime minister, is fighting an uphill battle against another experienced political hand, Romano Prodi of a center-left coalition. Elections are April 9, but a period of coalition forming will follow afterward. Since Italy’s National Treasury owns Poste Italiane, politicians must order up the offering.
Second, the post office loses money on its main business of delivering mail. Sarmi said that for every €578 million ($700 million) the company spends to deliver mail annually, the government subsidizes it with €330 million. Since it is unlikely private investors would subsidize Italian mail, Sarmi said the post office must cut its losses before the offering. One likely solution: allow Poste Italiane more leeway in setting its prices.
Italy would be going the way of other European nations, including Sweden and Germany, which have been gradually — and in some cases, such as the Netherlands’ TNT NV, fully — privatizing their postal services.
It’s not the first time Italy has floated the idea. Efforts to shape up Poste Italiane and privatize it date to the late 1990s, when a plan of layoffs, automation and new electronic services were intended to bring it to breakeven status by 2001. In another thrust, an IPO was projected in 2002 within 18 months, an effort in which the government would have sold 35% of Poste Italiane for about €2.5 billion, valuing it as a whole at nearly €6 billion. Those prior efforts have been delayed.
The latest plan calls for the National Treasury to sell 20% of the company, reducing its 65% stake to 45%, Sarmi said. The postal service is 35% owned by state financing agency Cassa Depositi e Prestiti. He said it would be listed on the Milan Stock Exchange as well as a major U.S. exchange.
Over the years, Italy has advanced other gradual sales of state-owned companies, including national telecommunications company Telecom Italia SpA, electric utility Enel SpA and energy company Eni SpA. Like those former selloffs, the sale of Poste Italiane would help to pay down debt and, presumably, transform it into a more efficient operator.
Meanwhile, Sarmi said Poste Italiane is taking further measures to transform itself from old-economy postal services to a more technology-driven businesses, adding services including online consumer banking and logistics. Those services account for 60% of Poste Italiane’s revenue, which came to €9 billion in 2004, the latest figures available. Those services are profitable, allowing Poste Italiane an overall €235.9 million profit that year.
“You don’t think of postal services as part of the new economy,” Sarmi said. But clearly, Sarmi hinted to a group of journalists at a breakfast meeting, he does.
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