×

Italy to list $4.33B stake in post office on Milan stock exchange

AM-C | Getty Images | Getty Images

Italy's government will fire the starting gun on the flotation of its 153-year-old national post office in the first week of August, kicking off a widely anticipated 12 billion euro privatization program.

The plan to raise about 4 billion euro from listing a 40 per cent stake in Poste Italiane on the Milan stock exchange in late October is the main plank of Italian prime minister Matteo Renzi's stalled drive to sell off state assets.

The program had been billed as the biggest privatization push since the late 1990s when Italy sold stakes in energy groups Eni and Enel.

The money raised from listing the post office will ostensibly be used as debt relief, although it will barely make a dent in Italy's 2.2 trillion euros of national debt, equal to 132 percent of gross domestic product.

But Italian officials and bankers admit it has significant symbolic value coming in a moment of volatility in the euro zone when Italy is showing the first signs of pulling out of a three-year recession.

"Poste Italiane is a good proxy for Italy," Fabrizio Pagani, head of the office of the Treasury minister, told the Financial Times.

More from the Financial Times:

Matteo Renzi attempts to reform Italy justice system
Greek problems mask the rising risks in Italy and France
Italy approves school reforms

To bring to the market flagship Italian state companies including the post office, Italian railway group Ferrovie dello Stato and air controller Enav, which have also been earmarked for partial sale, "means to make these companies stronger and more competitive" under the scrutiny of international investors, he said.

Poste Italiane is a national behemoth with 24 billion euros in annual revenues, 420 billion euros in postal savings deposits, 145,000 employees and a business that straddles logistics, savings and insurance.

Its stock market debut is being billed by bankers as an opportunity to create an asset management business in Italy at a time when the sector is flourishing as retail investors switch out of government debt.

The bulk of the share offer is aimed at institutional investors with early marketing receiving a positive response from US and UK-based investors and more limited interest from Asia-based sovereign wealth funds, according to a senior banker.

A five-year business plan aims to increase its revenues to €30 billion and its deposits to 500 billion euros by 2019. It also has a stake in the business of remittances, a growing segment in the Italian banking market reflecting the increasing migrant population in Italy.

But like other postal operators it is suffering a steep decline in its traditional mail business hitting profits.

Read MoreNow we can focus on terrorism and Tehran: Italy PM

Its initial public offering was expected to take place last year but pushed back after a disappointing debut on Milan's exchange last June by Fincantieri, the state-owned ship builder and shipyard owner.

In 2014, Poste Italiane recorded operating profit of 694 million euros, down from 1.4 billion euros in 2013, and net profit of 12 million euros, down from 1 billion euros in 2013.

The draft prospectus is due to be filed with Italy's stock market regulator in the first week of August meaning, under the usual regulatory timeframe, the company would be given approval to list by October, bankers said. Bank of America Merrill Lynch, Citigroup and Mediobanca are joint lead bookrunners on the deal. The Treasury is being advised by Lazard and the company by Rothschild.

The privatization, like that of Royal Mail in the U.K. two years ago, is politically contentious amid expectations of subsequent cost cutting and job losses.

A video clip taken by a postal worker last month went viral on YouTube in Italy showing government-appointed chief executive Francesco Caio, former head of aviation group Avio and former CEO of Cable & Wireless Communications in the U.K., heckled at a depot in Milan over his 1.2 million euro pay package.