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INTERVIEW-Italy's Ansaldo STS eyes small acquisitions despite feud with activist investors

activist investors@

* U.S fund Elliott in feud with Hitachi over acquisition price

* CEO says battle has hampered group's decision-making

* Genoa-base group confirms 2017 guidance (Recasts, adds details, quotes and context)

MILAN, July 19 (Reuters) - Italian rail-signalling company Ansaldo STS is looking for small acquisitions to offset a sector slowdown though it sees no quick solution to its row with activist funds holding almost a third of the group, its chief executive told Reuters.

Investments funds led by Elliott Management have engaged in a feud with Ansaldo STS's controlling shareholder Hitachi since the Japanese company bought the company in 2015, challenging the price paid as well as governance and strategy.

Owned by U.S. hedge fund manager Paul Singer, Elliott is vocal in many board rooms at European and U.S. companies, including Dutch paintmaker Akzo Nobel and Anglo-Australian miner BHP Billiton, where it has built sizeable stakes and waged lengthy battles.

It is the second biggest shareholder in Ansaldo STS, with a 22.5 percent stake, an option to buy a further 8.8 percent, and three board seats.

Chief Executive Andrew Barr told Reuters the tug-of-war with Elliott had hampered the group's decision-making but said it needed to press on with business.

"There is still growth in the market, but we see that it is slowing down so we are also looking at ... small acquisitions," he said late on Tuesday. "There is nothing concrete at the moment but we are looking hard across sectors."

Barr, who has been at the helm of the group for just over a year, confirmed the group's guidance for 2017, with new orders of between 1.5-2 billion euros ($1.7-2.3 billion) and revenues between 1.35-1.45 billion euros.

In the first quarter, new orders stood at 266 million euros, down 14 percent year-on-year. The Genoa-based group, is vying for big contracts in Baltimore and Riyadh, after orders in the first three months were smaller than expected.

UNCERTAIN HORIZON

Hitachi bought 40 percent of Ansaldo STS from Italian defence conglomerate Leonardo.

It later raised its stake to 51 percent through a mandatory buyout of minorities but failed to reach the threshold required to delist Ansaldo STS and fold it into its own operations.

Elliott said the bid price was too low, triggering several complaints to the market regulator and a lawsuit which is now before the European Court of Justice.

Elliott says Hitachi underpaid by colluding with the seller, an allegation both Hitachi and Leonardo have denied. It has also questioned the independence of Ansaldo STS's board, opening a dedicated website to list its grievances.

In one of the latest clashes, Hitachi in May scrapped a dividend payout already approved by the board after Elliott requested it to be raised.

Barr said the stalemate would not be resolved anytime soon.

"One of the reasons I have been going around the world and meeting staff is to give them some reassurance that we are in a position to focus on the future of the company," the 44-year old executive said.

"(The row) does affect us, because we are constantly planning to a horizon that we don't know where it is."

With funds Amber and Litespeed, which hold a combined stake of over 6 percent, Elliott could veto any extraordinary operations proposed in shareholding meetings.

"The main message to the staff has been: let's get on and deliver, let's look at the planning for the future with an eye on continuing with the company as it is, and one eye with whenever the integration (with Hitachi) happens."

($1 = 0.8678 euros) (Reporting by Giulia Segreti and Elisa Anzolin Editing by Jeremy Gaunt)